Business Segments

6 Months Ended

Jun. 30, 2014

Business Segments

BUSINESS SEGMENTS

Our primary business is the generation, transmission and distribution of electricity. Within our Vertically Integrated Utilities segment, we centrally dispatch generation assets and manage our overall utility operations on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight. Intersegment sales and transfers are generally based on underlying contractual arrangements and agreements.

During the fourth quarter of 2013, we changed the structure of our internal organization which resulted in a change in the composition of our reportable segments. In accordance with authoritative accounting guidance for segment reporting, prior period financial information has been recast in the financial statements and footnotes to be comparable to the current year presentation of reportable segments.

Our reportable segments and their related business activities are outlined below:

Vertically Integrated Utilities

• Generation, transmission and distribution of electricity for sale to retail and wholesale customers through assets owned and operated by AEGCo, APCo, I&M, KGPCo, KPCo, PSO, SWEPCo and WPCo.

Transmission and Distribution Utilities

• Transmission and distribution of electricity for sale to retail and wholesale customers through assets owned and operated by OPCo, TCC and TNC.

• OPCo purchases energy to serve standard service offer customers, and provides capacity for all connected load.

AEP Transmission Holdco

• Development, construction and operation of transmission facilities through investments in our wholly-owned transmission only subsidiaries and transmission only joint ventures.  These investments have PUCT-approved or FERC-approved returns on equity.

Generation & Marketing

• Nonregulated generation in ERCOT and PJM.

• Marketing, risk management and retail activities in ERCOT, PJM and MISO.

AEP River Operations

• Commercial barging operations that transports liquids, coal and dry bulk commodities primarily on the Ohio, Illinois and lower Mississippi Rivers.

The remainder of our activities is presented as Corporate and Other.  While not considered a reportable segment, Corporate and Other primarily includes management and professional services to AEP provided at cost to AEP subsidiaries and the purchasing of receivables from certain AEP utility subsidiaries. This segment also includes Parent's guarantee revenue received from affiliates, investment income, interest income and interest expense and other nonallocated costs.

The tables below present our reportable segment information for the three and six months ended June 30, 2014 and 2013 and balance sheet information as of June 30, 2014 and December 31, 2013.  These amounts include certain estimates and allocations where necessary.

	Vertically Integrated Utilities			Transmission and Distribution Utilities		AEP Transmission Holdco		Generation & Marketing				AEP River Operations			Corporate and Other (a)			Reconciling Adjustments				Consolidated
	(in millions)
Three Months Ended   June 30, 2014
Revenues from:
External Customers	$	2,236	(b)	$	1,064	$	21	$	573		(b)	$	140		$	10		$	—		(c)	$	4,044
Other Operating Segments	16		(b)	70		36		340			(b)	20			12			(494		)		—
Total Revenues	$	2,252		$	1,134	$	57	$	913			$	160		$	22		$	(494	)		$	4,044
Net Income (Loss)	$	155		$	90	$	47	$	98			$	3		$	(2	)	$	—			$	391
	Vertically Integrated Utilities			Transmission and Distribution Utilities		AEP Transmission Holdco		Generation & Marketing				AEP River Operations			Corporate and Other (a)			Reconciling Adjustments				Consolidated
	(in millions)
Three Months Ended   June 30, 2013
Revenues from:
External Customers	$	2,176		$	1,019	$	6	$	298			$	111		$	9		$	(37	)	(c)	$	3,582
Other Operating Segments	126			45		13		594				6			12			(796		)		—
Total Revenues	$	2,302		$	1,064	$	19	$	892			$	117		$	21		$	(833	)		$	3,582
Net Income (Loss)	$	153		$	75	$	19	$	(9	)		$	(9	)	$	110		$	—			$	339

	Vertically Integrated Utilities			Transmission and Distribution Utilities		AEP Transmission Holdco		Generation & Marketing			AEP River Operations			Corporate and Other (a)			Reconciling Adjustments				Consolidated
	(in millions)
Six Months Ended   June 30, 2014
Revenues from:
External Customers	$	4,785	(b)	$	2,225	$	33	$	1,394	(b)	$	286		$	20		$	(51	)	(c)	$	8,692
Other Operating Segments	53		(b)	124		52		770		(b)	39			28			(1,066		)		—
Total Revenues	$	4,838		$	2,349	$	85	$	2,164		$	325		$	48		$	(1,117	)		$	8,692
Net Income (Loss)	$	434		$	187	$	71	$	261		$	6		$	(7	)	$	—			$	952
	Vertically Integrated Utilities			Transmission and Distribution Utilities		AEP Transmission Holdco		Generation & Marketing			AEP River Operations			Corporate and Other (a)			Reconciling Adjustments				Consolidated
	(in millions)
Six Months Ended   June 30, 2013
Revenues from:
External Customers	$	4,532		$	2,109	$	9	$	556		$	239		$	14		$	(51	)	(c)	$	7,408
Other Operating Segments	285			89		18		1,256			11			25			(1,684		)		—
Total Revenues	$	4,817		$	2,198	$	27	$	1,812		$	250		$	39		$	(1,735	)		$	7,408
Net Income (Loss)	$	334		$	162	$	31	$	76		$	(11	)	$	111		$	—			$	703

	Vertically Integrated Utilities		Transmission and Distribution Utilities		AEP Transmission Holdco		Generation & Marketing		AEP River Operations		Corporate and Other (a)		Reconciling Adjustments				Consolidated
	(in millions)
June 30, 2014
Total Property, Plant and Equipment	$	38,390	$	12,554	$	2,079	$	8,345	$	640	$	329	$	(272	)	(d)	$	62,065
Accumulated Depreciation and Amortization	12,562		3,407		16		3,514		204		181		(92		)	(d)	19,792
Total Property Plant and Equipment - Net	$	25,828	$	9,147	$	2,063	$	4,831	$	436	$	148	$	(180	)	(d)	$	42,273
Total Assets	$	33,024	$	13,859	$	2,702	$	6,301	$	638	$	20,379	$	(19,283	)	(d) (e)	$	57,620
Long-term Debt Due Within One Year:
Affiliated	$	131	$	—	$	—	$	125	$	—	$	—	$	(256	)		$	—
Non-Affiliated	1,382		448		—		687		3		4		—				2,524
Long-term Debt:
Affiliated	20		—		—		32		—		—		(52		)		—
Non-Affiliated	8,445		5,306		689		239		82		840		—				15,601
Total Long-term Debt	$	9,978	$	5,754	$	689	$	1,083	$	85	$	844	$	(308	)		$	18,125
	Vertically Integrated Utilities		Transmission and Distribution Utilities		AEP Transmission Holdco		Generation & Marketing		AEP River Operations		Corporate and Other (a)		Reconciling Adjustments				Consolidated
	(in millions)
December 31, 2013
Total Property, Plant and Equipment	$	37,545	$	12,143	$	1,636	$	8,277	$	638	$	315	$	(269	)	(d)	$	60,285
Accumulated Depreciation and Amortization	12,250		3,342		10		3,409		189		173		(85		)	(d)	19,288
Total Property Plant and Equipment - Net	$	25,295	$	8,801	$	1,626	$	4,868	$	449	$	142	$	(184	)	(d)	$	40,997
Total Assets	$	32,791	$	14,165	$	2,245	$	6,426	$	673	$	19,645	$	(19,531	)	(d) (e)	$	56,414
Long-term Debt Due Within One Year:
Affiliated	$	—	$	—	$	—	$	179	$	5	$	—	$	(184	)		$	—
Non-Affiliated	720		697		—		126		2		4		—				1,549
Long-term Debt:
Affiliated	151		—		—		118		10		—		(279		)		—
Non-Affiliated	9,265		5,360		620		664		83		836		—				16,828
Total Long-term Debt	$	10,136	$	6,057	$	620	$	1,087	$	100	$	840	$	(463	)		$	18,377

(a) Corporate and Other primarily includes management and professional services to AEP provided at cost to AEP subsidiaries and the purchasing of receivables from certain AEP utility subsidiaries. This segment also includes Parent's guarantee revenue received from affiliates, investment income, interest income and interest expense and other nonallocated costs.

(b) Includes the impact of the corporate separation of OPCo's generation assets and liabilities that took effect December 31, 2013, as well as the impact of the termination of the Interconnection Agreement effective January 1, 2014.

(c) Reconciling Adjustments for External Customers primarily include eliminations as a result of corporate separation.

(d) Includes eliminations due to an intercompany capital lease.

(e) Reconciling Adjustments for Total Assets primarily include the elimination of intercompany advances to affiliates and intercompany accounts receivable along with the elimination of AEP's investments in subsidiary companies.

Appalachian Power Co [Member]

Business Segments

BUSINESS SEGMENTS

The Registrant Subsidiaries each have one reportable segment, an integrated electricity generation, transmission and distribution business.  The Registrant Subsidiaries’ other activities are insignificant.  The Registrant Subsidiaries’ operations are managed on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight on the business process, cost structures and operating results.

Indiana Michigan Power Co [Member]

Business Segments

BUSINESS SEGMENTS

The Registrant Subsidiaries each have one reportable segment, an integrated electricity generation, transmission and distribution business.  The Registrant Subsidiaries’ other activities are insignificant.  The Registrant Subsidiaries’ operations are managed on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight on the business process, cost structures and operating results.

Ohio Power Co [Member]

Business Segments

BUSINESS SEGMENTS

The Registrant Subsidiaries each have one reportable segment, an integrated electricity generation, transmission and distribution business.  The Registrant Subsidiaries’ other activities are insignificant.  The Registrant Subsidiaries’ operations are managed on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight on the business process, cost structures and operating results.

Public Service Co Of Oklahoma [Member]

Business Segments

BUSINESS SEGMENTS

The Registrant Subsidiaries each have one reportable segment, an integrated electricity generation, transmission and distribution business.  The Registrant Subsidiaries’ other activities are insignificant.  The Registrant Subsidiaries’ operations are managed on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight on the business process, cost structures and operating results.

Southwestern Electric Power Co [Member]

Business Segments

BUSINESS SEGMENTS

The Registrant Subsidiaries each have one reportable segment, an integrated electricity generation, transmission and distribution business.  The Registrant Subsidiaries’ other activities are insignificant.  The Registrant Subsidiaries’ operations are managed on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight on the business process, cost structures and operating results.