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Financing Activities
 9 Months Ended
Sep. 30, 2013
Financing Activities

11. FINANCING ACTIVITIES

 

Long-term Debt

 

The following table details long-term debt outstanding as of September 30, 2013 and December 31, 2012:

 Type of Debt September 30, 2013 December 31, 2012
   (in millions)
 Senior Unsecured Notes $ 11,705 $ 12,712
 Pollution Control Bonds   1,982   1,958
 Notes Payable   425   427
 Securitization Bonds   2,338   2,281
 Spent Nuclear Fuel Obligation (a)   265   265
 Other Long-term Debt    886   140
 Fair Value of Interest Rate Hedges   (7)   3
 Unamortized Discount, Net   (26)   (29)
 Total Long-term Debt Outstanding   17,568   17,757
 Long-term Debt Due Within One Year   1,366   2,171
 Long-term Debt  $ 16,202 $ 15,586

(a)       Pursuant to the Nuclear Waste Policy Act of 1982, I&M, a nuclear licensee, has an obligation to the United States Department of Energy for spent nuclear fuel disposal. The obligation includes a one-time fee for nuclear fuel consumed prior to April 7, 1983. Trust fund assets related to this obligation were $309 million and $308 million as of September 30, 2013 and December 31, 2012, respectively, and are included in Spent Nuclear Fuel and Decommissioning Trusts on our condensed balance sheets.

 

Long-term debt and other securities issued, retired and principal payments made during the first nine months of 2013 are shown in the tables below:

      Principal   Interest  
 Company Type of Debt Amount  Rate Due Date
 Issuances:  (in millions) (%)  
 AEP Other Long-term Debt $ 200(a) Variable 2015
 APCo Pollution Control Bonds   30  3.25 2018
 APCo Pollution Control Bonds   40  3.25 2018
 I&M Notes Payable   101  Variable 2017
 I&M  Senior Unsecured Notes   250  3.20 2023
 OPCo Other Long-term Debt   600(b) Variable 2015
 OPCo Pollution Control Bonds  50  Variable 2014
 OPCo Pollution Control Bonds  65  Variable 2014
 OPCo Securitization Bonds   165  0.96 2018
 OPCo Securitization Bonds   102  2.05 2020
             
 Non-Registrant:          
 AEPTCo Senior Unsecured Notes   25  4.83 2043
 TCC Other Long-term Debt   75(c) Variable 2016
 TCC Pollution Control Bonds  120  4.00 2030
 TNC  Other Long-term Debt   75(d) Variable 2016
 TNC  Senior Unsecured Notes   125  3.09 2023
 TNC  Senior Unsecured Notes   75  4.48 2043
 Total Issuances   $ 2,098(e)    

      Principal   Interest  
 Company Type of Debt Amount Paid  Rate Due Date
 Retirements and   (in millions) (%)  
  Principal Payments:          
 AEP Other Long-term Debt $ 200(a) Variable 2015
 APCo Pollution Control Bonds   30  4.85 2013
 APCo Pollution Control Bonds   40  4.85 2013
 APCo Senior Unsecured Notes   275  Variable 2013
 I&M Notes Payable   6  5.44 2013
 I&M Notes Payable   10  4.00 2014
 I&M Notes Payable   12  Variable 2015
 I&M Notes Payable   15  Variable 2016
 I&M Notes Payable   10  2.12 2016
 I&M Notes Payable   31  Variable 2016
 I&M Notes Payable   8  Variable 2017
 I&M Other Long-term Debt   4  Variable 2015
 I&M Other Long-term Debt   1  6.00 2025
 I&M Pollution Control Bonds   40  5.25 2025
 OPCo Pollution Control Bonds   56  5.10 2013
 OPCo Pollution Control Bonds   50  5.15 2026
 OPCo Pollution Control Bonds   65  4.90 2037
 OPCo Senior Unsecured Notes   250  5.50 2013
 OPCo Senior Unsecured Notes   250  5.50 2013
 OPCo Senior Unsecured Notes   250  5.75 2013
 OPCo Senior Unsecured Notes   225  6.38 2033
 SWEPCo Notes Payable   3  4.58 2032
             
 Non-Registrant:          
 AEP Subsidiaries Notes Payable   5  Variable 2017
 AEP Subsidiaries Notes Payable   2  7.59 - 8.03 2026
 AEGCo Senior Unsecured Notes   7  6.33 2037
 TCC Securitization Bonds   76  4.98 2013
 TCC Securitization Bonds   67  5.96 2013
 TCC Securitization Bonds   42  5.09 2015
 TCC Securitization Bonds   26  0.88 2017
 TNC Senior Unsecured Notes   225  5.50 2013
 Total Retirements and          
  Principal Payments   $ 2,281     

(a)       Draw on a $1 billion term credit facility that was terminated in July 2013.

(b)       Draw on a $1 billion term credit facility due in May 2015.

(c)       Draw on a $100 million three-year revolving credit facility to be used for general corporate purposes.

(d)       Draw on a $75 million three-year revolving credit facility to be used for general corporate purposes.

(e)       Amount indicated on the statement of cash flows is net of issuance costs and premium or discount and will not tie to the total issuances.

 

In February 2013, we entered into a $1 billion term credit facility due in May 2015. In July 2013, we terminated the $1 billion term credit facility. Also in July 2013, AEPGenCo, APCo, KPCo and OPCo entered into a $1 billion term credit facility due in May 2015 to provide liquidity during the corporate separation process. Upon entering into the new term credit facility, we repaid the $200 million Long-term Debt and OPCo subsequently borrowed $600 million under the new credit facility. Under the credit facility, OPCo may assign borrowings to AEPGenCo upon the transfer of OPCo's generation assets to AEPGenCo. Subject to regulatory approval, AEPGenCo may further assign a portion of the borrowings to APCo and KPCo, not to exceed $500 million and $250 million, respectively, upon AEPGenCo's subsequent transfer of certain of those generation assets to APCo and KPCo.

 

In October 2013, I&M retired $37 million of Notes Payable related to DCC Fuel.

 

As of September 30, 2013, trustees held on our behalf, $500 million of our reacquired Pollution Control Bonds.

Dividend Restrictions

 

Parent Restrictions

 

The holders of our common stock are entitled to receive the dividends declared by our Board of Directors provided funds are legally available for such dividends. Our income derives from our common stock equity in the earnings of our utility subsidiaries.

 

Pursuant to the leverage restrictions in our credit agreements, we must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%. The payment of cash dividends indirectly results in an increase in the percentage of debt to total capitalization of the company distributing the dividend. The method for calculating outstanding debt and capitalization is contractually defined in the credit agreements. None of AEP's retained earnings were restricted for the purpose of the payment of dividends.

 

Utility Subsidiaries' Restrictions

 

Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of our utility subsidiaries to transfer funds to us in the form of dividends. Specifically, several of our public utility subsidiaries have credit agreements that contain a covenant that limits their debt to capitalization ratio to 67.5%.

       

The Federal Power Act prohibits the utility subsidiaries from participating “in the making or paying of any dividends of such public utility from any funds properly included in capital account.” The term “capital account” is not defined in the Federal Power Act or its regulations. Management understands “capital account” to mean the book value of the common stock. This restriction does not limit the ability of the utility subsidiaries to pay dividends out of retained earnings.

Short-term Debt

 

Our outstanding short-term debt was as follows:

    September 30, 2013 December 31, 2012
    Outstanding Interest Outstanding Interest
 Type of DebtAmountRate (a) AmountRate (a)
   (in millions)    (in millions)   
 Securitized Debt for Receivables (b) $ 700  0.23% $ 657  0.26%
 Commercial Paper   518  0.31%   321  0.42%
 Line of Credit – Sabine (c)   -  -%   3  1.82%
 Total Short-term Debt $ 1,218    $ 981   

(a)       Weighted average rate.

(b)       Amount of securitized debt for receivables as accounted for under the ''Transfers and Servicing'' accounting guidance.

(c)       This line of credit does not reduce available liquidity under AEP's credit facilities.

Credit Facilities

 

For an additional discussion of credit facilities, see “Letters of Credit” section of Note 4.

Securitized Accounts Receivable – AEP Credit

 

AEP Credit has a receivables securitization agreement with bank conduits. Under the securitization agreement, AEP Credit receives financing from the bank conduits for the interest in the receivables AEP Credit acquires from affiliated utility subsidiaries. AEP Credit continues to service the receivables. These securitized transactions allow AEP Credit to repay its outstanding debt obligations, continue to purchase our operating companies' receivables and accelerate AEP Credit's cash collections.

 

In June 2013, we amended our receivables securitization agreement. The agreement provides a commitment of $700 million from bank conduits to purchase receivables. We amended a commitment of $385 million to now expire in June 2014. The remaining commitment of $315 million expires in June 2015.

 

Accounts receivable information for AEP Credit is as follows:

    Three Months Ended  Nine Months Ended  
    September 30, September 30, 
    2013 2012 2013 2012 
   (dollars in millions) 
 Effective Interest Rates on Securitization of             
  Accounts Receivable   0.23%  0.26%  0.23%  0.26%
 Net Uncollectible Accounts Receivable             
  Written Off $ 12 $ 8 $ 26 $ 21 

    September 30, December 31,
    2013 2012
    (in millions)
 Accounts Receivable Retained Interest and Pledged as Collateral      
  Less Uncollectible Accounts $ 965 $ 835
 Total Principal Outstanding   700   657
 Delinquent Securitized Accounts Receivable   60   37
 Bad Debt Reserves Related to Securitization/Sale of Accounts Receivable   17   21
 Unbilled Receivables Related to Securitization/Sale of Accounts Receivable   266   316

Customer accounts receivable retained and securitized for our operating companies are managed by AEP Credit. AEP Credit's delinquent customer accounts receivable represents accounts greater than 30 days past due.

 
Appalachian Power Co [Member]
  
Financing Activities

11. FINANCING ACTIVITIES

 

Long-term Debt

 

Long-term debt and other securities issued, retired and principal payments made during the first nine months of 2013 are shown in the tables below:

     Principal  Interest  
 Company Type of Debt Amount (a) Rate Due Date
 Issuances:   (in thousands) (%)  
 APCo Pollution Control Bonds $ 30,000 3.25 2018
 APCo Pollution Control Bonds   40,000 3.25 2018
 I&M Notes Payable   101,354 Variable 2017
 I&M Senior Unsecured Notes   250,000 3.20 2023
 OPCo Other Long-term Debt   200,000(b)Variable 2015
 OPCo Other Long-term Debt   600,000(c)Variable 2015
 OPCo Pollution Control Bonds   50,000 Variable 2014
 OPCo Pollution Control Bonds   65,000 Variable 2014
 OPCo Securitization Bonds   164,900 0.96 2018
 OPCo Securitization Bonds   102,508 2.05 2020

      Principal  Interest  
 Company Type of Debt Amount Paid Rate Due Date
 Retirements and   (in thousands) (%)  
  Principal Payments:         
 APCo Land Note $ 21 13.718 2026
 APCo Pollution Control Bonds   30,000 4.85 2013
 APCo Pollution Control Bonds   40,000 4.85 2013
 APCo Senior Unsecured Notes   275,000 Variable 2013
 I&M Notes Payable   6,083 5.44 2013
 I&M Notes Payable   9,811 4.00 2014
 I&M Notes Payable   12,071 Variable 2015
 I&M Notes Payable   14,945 Variable 2016
 I&M Notes Payable   10,350 2.12 2016
 I&M Notes Payable   31,289 Variable 2016
 I&M Notes Payable   8,204 Variable 2017
 I&M Other Long-term Debt   705 6.00 2025
 I&M Other Long-term Debt   4,086 Variable 2015
 I&M Pollution Control Bonds   40,000 5.25 2025
 OPCo Other Long-term Debt   200,000(b)Variable 2015
 OPCo Pollution Control Bonds   56,000 5.10 2013
 OPCo Pollution Control Bonds   50,000 5.15 2026
 OPCo Pollution Control Bonds   65,000 4.90 2037
 OPCo Senior Unsecured Notes   250,000 5.50 2013
 OPCo Senior Unsecured Notes   250,000 5.50 2013
 OPCo Senior Unsecured Notes   250,000 5.75 2013
 OPCo Senior Unsecured Notes   225,000 6.38 2033
 PSO Notes Payable   301 3.00 2027
 SWEPCo Notes Payable   3,250 4.58 2032

(a)       Amounts indicated on the statements of cash flows are net of issuance costs and premium or discount and will not tie to the issuance amounts.

(b)       Intercompany issuance from AEP consisting of a draw on a $1 billion term credit facility that was terminated in July 2013.

(c)       Draw on a $1 billion term credit facility due in May 2015.

 

 

In February 2013, AEP entered into a $1 billion credit facility due in May 2015. In July 2013, the $1 billion term credit facility due in May 2015 was terminated. Also in July 2013, AEPGenCo, APCo, KPCo and OPCo entered into a $1 billion term credit facility due in May 2015 to provide liquidity during the corporate separation process. Upon entering into the new term credit facility, OPCo repaid the $200 million Long-term Debt – Affiliated and subsequently borrowed $600 million Long-term Debt – Nonaffiliated under the new term credit facility. Under the credit facility, OPCo may assign borrowings to AEPGenCo upon the transfer of OPCo's generation assets to AEPGenCo. Subject to regulatory approval, AEPGenCo may further assign a portion of the borrowings to APCo and KPCo, not to exceed $500 million and $250 million, respectively, upon AEPGenCo's subsequent transfer of certain of those generation assets to APCo and KPCo.

 

Dividend Restrictions

 

The Registrant Subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the Registrant Subsidiaries to transfer funds to Parent in the form of dividends.

 

Federal Power Act

 

The Federal Power Act prohibits each of the Registrant Subsidiaries from participating “in the making or paying of any dividends of such public utility from any funds properly included in capital account.” The term “capital account” is not defined in the Federal Power Act or its regulations. Management understands “capital account” to mean the book value of the common stock.

 

Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generating plants. Because of their respective ownership of such plants, this reserve applies to APCo, I&M and OPCo.

 

None of these restrictions limit the ability of the Registrant Subsidiaries to pay dividends out of retained earnings.

 

Leverage Restrictions

 

Pursuant to the credit agreement leverage restrictions, APCo, I&M and OPCo must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%.

Utility Money Pool – AEP System

 

The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of AEP's subsidiaries. The corporate borrowing program includes a Utility Money Pool, which funds AEP's utility subsidiaries, and a Nonutility Money Pool, which funds a majority of AEP's nonutility subsidiaries. The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with the FERC. The amounts of outstanding loans to (borrowings from) the Utility Money Pool as of September 30, 2013 and December 31, 2012 are included in Advances to Affiliates and Advances from Affiliates, respectively, on each of the Registrant Subsidiaries' condensed balance sheets. The Utility Money Pool participants' money pool activity and their corresponding authorized borrowing limits for the nine months ended September 30, 2013 are described in the following table:

               Net   
               Loans to   
   Maximum Maximum Average Average (Borrowings from) Authorized
   Borrowings Loans  Borrowings Loans  the Utility Short-term
   from the Utility to the Utility from the Utility to the Utility Money Pool as of Borrowing
 Company Money Pool Money Pool Money Pool Money Pool September 30, 2013 Limit
   (in thousands)
 APCo $ 331,771 $ 39,372 $ 126,391 $ 23,632 $ (253,352) $ 600,000
 I&M   23,135   384,435   8,308   239,647   322,476   500,000
 OPCo   410,456   415,605   228,719   59,047   9,401   600,000
 PSO   46,806   52,734   18,658   18,808   19,442   300,000
 SWEPCo   15,386   153,830   4,154   38,449   18,634   350,000

The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:

   Nine Months Ended September 30,
   2013 2012
 Maximum Interest Rate  0.43%  0.56%
 Minimum Interest Rate  0.28%  0.44%

The average interest rates for funds borrowed from and loaned to the Utility Money Pool for the nine months ended September 30, 2013 and 2012 are summarized for all Registrant Subsidiaries in the following table:

   Average Interest Rate  Average Interest Rate
   for Funds Borrowed   for Funds Loaned
   from the Utility Money Pool for   to the Utility Money Pool for
   Nine Months Ended September 30, Nine Months Ended September 30,
 Company 2013 20122013 2012
 APCo  0.33%  0.48%  0.34%  0.48%
 I&M  0.36%  -%  0.33%  0.47%
 OPCo  0.34%  0.47%  0.32%  0.50%
 PSO  0.34%  -%  0.32%  0.47%
 SWEPCo  0.33%  0.53%  0.36%  0.47%

Credit Facilities

 

For a discussion of credit facilities, see “Letters of Credit” section of Note 4.

Sale of Receivables – AEP Credit

 

Under a sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit's financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary's receivables. APCo does not have regulatory authority to sell its West Virginia accounts receivable. The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries' condensed statements of income. The Registrant Subsidiaries manage and service their customer accounts receivable sold.

 

In June 2013, AEP Credit amended its receivables securitization agreement. The agreement provides a commitment of $700 million from bank conduits to purchase receivables. AEP Credit amended a commitment of $385 million to now expire in June 2014. The remaining commitment of $315 million expires in June 2015.

 

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary as of September 30, 2013 and December 31, 2012 was as follows:

    September 30, December 31,
 Company 2013 2012
    (in thousands)
 APCo $ 135,579 $ 153,719
 I&M   143,804   123,447
 OPCo   321,054   300,675
 PSO   147,586   85,530
 SWEPCo   180,922   132,449

The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:

    Three Months Ended September 30, Nine Months Ended September 30,
 Company 2013 2012 2013 2012
    (in thousands)
 APCo $ 1,575 $ 1,703 $ 4,590 $ 5,389
 I&M   1,762   1,674   4,744   4,738
 OPCo   5,076   5,362   14,440   15,900
 PSO   1,549   1,990   4,314   5,547
 SWEPCo   1,649   1,786   4,413   4,720

The Registrant Subsidiaries' proceeds on the sale of receivables to AEP Credit were:

    Three Months Ended September 30, Nine Months Ended September 30,
 Company 2013 2012 2013 2012
    (in thousands)
 APCo $ 340,438 $ 351,570 $ 1,081,615 $ 993,975
 I&M   384,316   358,936   1,097,563   1,018,933
 OPCo   658,829   790,115   2,017,746   2,284,749
 PSO   382,167   342,819   944,062   919,343
 SWEPCo   450,294   444,461   1,171,306   1,145,182
Indiana Michigan Power Co [Member]
  
Financing Activities

11. FINANCING ACTIVITIES

 

Long-term Debt

 

Long-term debt and other securities issued, retired and principal payments made during the first nine months of 2013 are shown in the tables below:

     Principal  Interest  
 Company Type of Debt Amount (a) Rate Due Date
 Issuances:   (in thousands) (%)  
 APCo Pollution Control Bonds $ 30,000 3.25 2018
 APCo Pollution Control Bonds   40,000 3.25 2018
 I&M Notes Payable   101,354 Variable 2017
 I&M Senior Unsecured Notes   250,000 3.20 2023
 OPCo Other Long-term Debt   200,000(b)Variable 2015
 OPCo Other Long-term Debt   600,000(c)Variable 2015
 OPCo Pollution Control Bonds   50,000 Variable 2014
 OPCo Pollution Control Bonds   65,000 Variable 2014
 OPCo Securitization Bonds   164,900 0.96 2018
 OPCo Securitization Bonds   102,508 2.05 2020

      Principal  Interest  
 Company Type of Debt Amount Paid Rate Due Date
 Retirements and   (in thousands) (%)  
  Principal Payments:         
 APCo Land Note $ 21 13.718 2026
 APCo Pollution Control Bonds   30,000 4.85 2013
 APCo Pollution Control Bonds   40,000 4.85 2013
 APCo Senior Unsecured Notes   275,000 Variable 2013
 I&M Notes Payable   6,083 5.44 2013
 I&M Notes Payable   9,811 4.00 2014
 I&M Notes Payable   12,071 Variable 2015
 I&M Notes Payable   14,945 Variable 2016
 I&M Notes Payable   10,350 2.12 2016
 I&M Notes Payable   31,289 Variable 2016
 I&M Notes Payable   8,204 Variable 2017
 I&M Other Long-term Debt   705 6.00 2025
 I&M Other Long-term Debt   4,086 Variable 2015
 I&M Pollution Control Bonds   40,000 5.25 2025
 OPCo Other Long-term Debt   200,000(b)Variable 2015
 OPCo Pollution Control Bonds   56,000 5.10 2013
 OPCo Pollution Control Bonds   50,000 5.15 2026
 OPCo Pollution Control Bonds   65,000 4.90 2037
 OPCo Senior Unsecured Notes   250,000 5.50 2013
 OPCo Senior Unsecured Notes   250,000 5.50 2013
 OPCo Senior Unsecured Notes   250,000 5.75 2013
 OPCo Senior Unsecured Notes   225,000 6.38 2033
 PSO Notes Payable   301 3.00 2027
 SWEPCo Notes Payable   3,250 4.58 2032

(a)       Amounts indicated on the statements of cash flows are net of issuance costs and premium or discount and will not tie to the issuance amounts.

(b)       Intercompany issuance from AEP consisting of a draw on a $1 billion term credit facility that was terminated in July 2013.

(c)       Draw on a $1 billion term credit facility due in May 2015.

 

In October 2013, I&M retired $37 million of Notes Payable related to DCC Fuel.

 

As of September 30, 2013, trustees held on behalf of I&M and OPCo, $40 million and $460 million, respectively, of their reacquired Pollution Control Bonds.

 

Dividend Restrictions

 

The Registrant Subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the Registrant Subsidiaries to transfer funds to Parent in the form of dividends.

 

Federal Power Act

 

The Federal Power Act prohibits each of the Registrant Subsidiaries from participating “in the making or paying of any dividends of such public utility from any funds properly included in capital account.” The term “capital account” is not defined in the Federal Power Act or its regulations. Management understands “capital account” to mean the book value of the common stock.

 

Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generating plants. Because of their respective ownership of such plants, this reserve applies to APCo, I&M and OPCo.

 

None of these restrictions limit the ability of the Registrant Subsidiaries to pay dividends out of retained earnings.

 

Leverage Restrictions

 

Pursuant to the credit agreement leverage restrictions, APCo, I&M and OPCo must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%.

Utility Money Pool – AEP System

 

The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of AEP's subsidiaries. The corporate borrowing program includes a Utility Money Pool, which funds AEP's utility subsidiaries, and a Nonutility Money Pool, which funds a majority of AEP's nonutility subsidiaries. The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with the FERC. The amounts of outstanding loans to (borrowings from) the Utility Money Pool as of September 30, 2013 and December 31, 2012 are included in Advances to Affiliates and Advances from Affiliates, respectively, on each of the Registrant Subsidiaries' condensed balance sheets. The Utility Money Pool participants' money pool activity and their corresponding authorized borrowing limits for the nine months ended September 30, 2013 are described in the following table:

               Net   
               Loans to   
   Maximum Maximum Average Average (Borrowings from) Authorized
   Borrowings Loans  Borrowings Loans  the Utility Short-term
   from the Utility to the Utility from the Utility to the Utility Money Pool as of Borrowing
 Company Money Pool Money Pool Money Pool Money Pool September 30, 2013 Limit
   (in thousands)
 APCo $ 331,771 $ 39,372 $ 126,391 $ 23,632 $ (253,352) $ 600,000
 I&M   23,135   384,435   8,308   239,647   322,476   500,000
 OPCo   410,456   415,605   228,719   59,047   9,401   600,000
 PSO   46,806   52,734   18,658   18,808   19,442   300,000
 SWEPCo   15,386   153,830   4,154   38,449   18,634   350,000

The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:

   Nine Months Ended September 30,
   2013 2012
 Maximum Interest Rate  0.43%  0.56%
 Minimum Interest Rate  0.28%  0.44%

The average interest rates for funds borrowed from and loaned to the Utility Money Pool for the nine months ended September 30, 2013 and 2012 are summarized for all Registrant Subsidiaries in the following table:

   Average Interest Rate  Average Interest Rate
   for Funds Borrowed   for Funds Loaned
   from the Utility Money Pool for   to the Utility Money Pool for
   Nine Months Ended September 30, Nine Months Ended September 30,
 Company 2013 20122013 2012
 APCo  0.33%  0.48%  0.34%  0.48%
 I&M  0.36%  -%  0.33%  0.47%
 OPCo  0.34%  0.47%  0.32%  0.50%
 PSO  0.34%  -%  0.32%  0.47%
 SWEPCo  0.33%  0.53%  0.36%  0.47%

Credit Facilities

 

For a discussion of credit facilities, see “Letters of Credit” section of Note 4.

Sale of Receivables – AEP Credit

 

Under a sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit's financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary's receivables. APCo does not have regulatory authority to sell its West Virginia accounts receivable. The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries' condensed statements of income. The Registrant Subsidiaries manage and service their customer accounts receivable sold.

 

In June 2013, AEP Credit amended its receivables securitization agreement. The agreement provides a commitment of $700 million from bank conduits to purchase receivables. AEP Credit amended a commitment of $385 million to now expire in June 2014. The remaining commitment of $315 million expires in June 2015.

 

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary as of September 30, 2013 and December 31, 2012 was as follows:

    September 30, December 31,
 Company 2013 2012
    (in thousands)
 APCo $ 135,579 $ 153,719
 I&M   143,804   123,447
 OPCo   321,054   300,675
 PSO   147,586   85,530
 SWEPCo   180,922   132,449

The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:

    Three Months Ended September 30, Nine Months Ended September 30,
 Company 2013 2012 2013 2012
    (in thousands)
 APCo $ 1,575 $ 1,703 $ 4,590 $ 5,389
 I&M   1,762   1,674   4,744   4,738
 OPCo   5,076   5,362   14,440   15,900
 PSO   1,549   1,990   4,314   5,547
 SWEPCo   1,649   1,786   4,413   4,720

The Registrant Subsidiaries' proceeds on the sale of receivables to AEP Credit were:

    Three Months Ended September 30, Nine Months Ended September 30,
 Company 2013 2012 2013 2012
    (in thousands)
 APCo $ 340,438 $ 351,570 $ 1,081,615 $ 993,975
 I&M   384,316   358,936   1,097,563   1,018,933
 OPCo   658,829   790,115   2,017,746   2,284,749
 PSO   382,167   342,819   944,062   919,343
 SWEPCo   450,294   444,461   1,171,306   1,145,182
Ohio Power Co [Member]
  
Financing Activities

11. FINANCING ACTIVITIES

 

Long-term Debt

 

Long-term debt and other securities issued, retired and principal payments made during the first nine months of 2013 are shown in the tables below:

     Principal  Interest  
 Company Type of Debt Amount (a) Rate Due Date
 Issuances:   (in thousands) (%)  
 APCo Pollution Control Bonds $ 30,000 3.25 2018
 APCo Pollution Control Bonds   40,000 3.25 2018
 I&M Notes Payable   101,354 Variable 2017
 I&M Senior Unsecured Notes   250,000 3.20 2023
 OPCo Other Long-term Debt   200,000(b)Variable 2015
 OPCo Other Long-term Debt   600,000(c)Variable 2015
 OPCo Pollution Control Bonds   50,000 Variable 2014
 OPCo Pollution Control Bonds   65,000 Variable 2014
 OPCo Securitization Bonds   164,900 0.96 2018
 OPCo Securitization Bonds   102,508 2.05 2020

      Principal  Interest  
 Company Type of Debt Amount Paid Rate Due Date
 Retirements and   (in thousands) (%)  
  Principal Payments:         
 APCo Land Note $ 21 13.718 2026
 APCo Pollution Control Bonds   30,000 4.85 2013
 APCo Pollution Control Bonds   40,000 4.85 2013
 APCo Senior Unsecured Notes   275,000 Variable 2013
 I&M Notes Payable   6,083 5.44 2013
 I&M Notes Payable   9,811 4.00 2014
 I&M Notes Payable   12,071 Variable 2015
 I&M Notes Payable   14,945 Variable 2016
 I&M Notes Payable   10,350 2.12 2016
 I&M Notes Payable   31,289 Variable 2016
 I&M Notes Payable   8,204 Variable 2017
 I&M Other Long-term Debt   705 6.00 2025
 I&M Other Long-term Debt   4,086 Variable 2015
 I&M Pollution Control Bonds   40,000 5.25 2025
 OPCo Other Long-term Debt   200,000(b)Variable 2015
 OPCo Pollution Control Bonds   56,000 5.10 2013
 OPCo Pollution Control Bonds   50,000 5.15 2026
 OPCo Pollution Control Bonds   65,000 4.90 2037
 OPCo Senior Unsecured Notes   250,000 5.50 2013
 OPCo Senior Unsecured Notes   250,000 5.50 2013
 OPCo Senior Unsecured Notes   250,000 5.75 2013
 OPCo Senior Unsecured Notes   225,000 6.38 2033
 PSO Notes Payable   301 3.00 2027
 SWEPCo Notes Payable   3,250 4.58 2032

(a)       Amounts indicated on the statements of cash flows are net of issuance costs and premium or discount and will not tie to the issuance amounts.

(b)       Intercompany issuance from AEP consisting of a draw on a $1 billion term credit facility that was terminated in July 2013.

(c)       Draw on a $1 billion term credit facility due in May 2015.

 

 

In February 2013, AEP entered into a $1 billion credit facility due in May 2015. In July 2013, the $1 billion term credit facility due in May 2015 was terminated. Also in July 2013, AEPGenCo, APCo, KPCo and OPCo entered into a $1 billion term credit facility due in May 2015 to provide liquidity during the corporate separation process. Upon entering into the new term credit facility, OPCo repaid the $200 million Long-term Debt – Affiliated and subsequently borrowed $600 million Long-term Debt – Nonaffiliated under the new term credit facility. Under the credit facility, OPCo may assign borrowings to AEPGenCo upon the transfer of OPCo's generation assets to AEPGenCo. Subject to regulatory approval, AEPGenCo may further assign a portion of the borrowings to APCo and KPCo, not to exceed $500 million and $250 million, respectively, upon AEPGenCo's subsequent transfer of certain of those generation assets to APCo and KPCo.

 

As of September 30, 2013, trustees held on behalf of I&M and OPCo, $40 million and $460 million, respectively, of their reacquired Pollution Control Bonds.

 

Dividend Restrictions

 

The Registrant Subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the Registrant Subsidiaries to transfer funds to Parent in the form of dividends.

 

Federal Power Act

 

The Federal Power Act prohibits each of the Registrant Subsidiaries from participating “in the making or paying of any dividends of such public utility from any funds properly included in capital account.” The term “capital account” is not defined in the Federal Power Act or its regulations. Management understands “capital account” to mean the book value of the common stock.

 

Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generating plants. Because of their respective ownership of such plants, this reserve applies to APCo, I&M and OPCo.

 

None of these restrictions limit the ability of the Registrant Subsidiaries to pay dividends out of retained earnings.

 

Leverage Restrictions

 

Pursuant to the credit agreement leverage restrictions, APCo, I&M and OPCo must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%.

Utility Money Pool – AEP System

 

The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of AEP's subsidiaries. The corporate borrowing program includes a Utility Money Pool, which funds AEP's utility subsidiaries, and a Nonutility Money Pool, which funds a majority of AEP's nonutility subsidiaries. The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with the FERC. The amounts of outstanding loans to (borrowings from) the Utility Money Pool as of September 30, 2013 and December 31, 2012 are included in Advances to Affiliates and Advances from Affiliates, respectively, on each of the Registrant Subsidiaries' condensed balance sheets. The Utility Money Pool participants' money pool activity and their corresponding authorized borrowing limits for the nine months ended September 30, 2013 are described in the following table:

               Net   
               Loans to   
   Maximum Maximum Average Average (Borrowings from) Authorized
   Borrowings Loans  Borrowings Loans  the Utility Short-term
   from the Utility to the Utility from the Utility to the Utility Money Pool as of Borrowing
 Company Money Pool Money Pool Money Pool Money Pool September 30, 2013 Limit
   (in thousands)
 APCo $ 331,771 $ 39,372 $ 126,391 $ 23,632 $ (253,352) $ 600,000
 I&M   23,135   384,435   8,308   239,647   322,476   500,000
 OPCo   410,456   415,605   228,719   59,047   9,401   600,000
 PSO   46,806   52,734   18,658   18,808   19,442   300,000
 SWEPCo   15,386   153,830   4,154   38,449   18,634   350,000

The activity in the above table does not include short-term lending activity of OPCo's wholly-owned subsidiary, AEPGenCo, which is a participant in the Nonutility Money Pool. The amounts of outstanding borrowings from the Nonutility Money Pool as of September 30, 2013 is included in Advances from Affiliates on OPCo's condensed balance sheet. For the nine months ended September 30, 2013, AEPGenCo had the following activity in the Nonutility Money Pool:

             
 Maximum Maximum Average Average Borrowings 
 Borrowings Loans  Borrowings Loans  from the Nonutility 
 from the Nonutility to the Nonutility from the Nonutility to the Nonutility Money Pool as of 
 Money Pool Money Pool Money Pool Money Pool September 30, 2013 
 (in thousands)
 $ 1,047 $ 1,027 $ 201 $ 208 $ 338 

The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:

   Nine Months Ended September 30,
   2013 2012
 Maximum Interest Rate  0.43%  0.56%
 Minimum Interest Rate  0.28%  0.44%

The average interest rates for funds borrowed from and loaned to the Utility Money Pool for the nine months ended September 30, 2013 and 2012 are summarized for all Registrant Subsidiaries in the following table:

   Average Interest Rate  Average Interest Rate
   for Funds Borrowed   for Funds Loaned
   from the Utility Money Pool for   to the Utility Money Pool for
   Nine Months Ended September 30, Nine Months Ended September 30,
 Company 2013 20122013 2012
 APCo  0.33%  0.48%  0.34%  0.48%
 I&M  0.36%  -%  0.33%  0.47%
 OPCo  0.34%  0.47%  0.32%  0.50%
 PSO  0.34%  -%  0.32%  0.47%
 SWEPCo  0.33%  0.53%  0.36%  0.47%

AEPGenCo's maximum, minimum and average interest rates for funds either borrowed from or loaned to the Nonutility Money Pool for the nine months ended September 30, 2013 are summarized in the following table:

  Maximum Minimum Maximum Minimum Average Average
  Interest Rate Interest Rate Interest Rate Interest Rate Interest Rate Interest Rate
  for Funds for Funds for Funds for Funds for Funds for Funds
Nine Months Borrowed from Borrowed from Loaned to Loaned to Borrowed from Loaned to
Ended the Nonutility the Nonutility the Nonutility the Nonutility the Nonutility the Nonutility
September 30, Money Pool Money PoolMoney Pool Money Pool Money Pool Money Pool
2013  0.61%  0.53%  0.35%  0.32%  0.56%  0.34%

Credit Facilities

 

For a discussion of credit facilities, see “Letters of Credit” section of Note 4.

Sale of Receivables – AEP Credit

 

Under a sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit's financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary's receivables. APCo does not have regulatory authority to sell its West Virginia accounts receivable. The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries' condensed statements of income. The Registrant Subsidiaries manage and service their customer accounts receivable sold.

 

In June 2013, AEP Credit amended its receivables securitization agreement. The agreement provides a commitment of $700 million from bank conduits to purchase receivables. AEP Credit amended a commitment of $385 million to now expire in June 2014. The remaining commitment of $315 million expires in June 2015.

 

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary as of September 30, 2013 and December 31, 2012 was as follows:

    September 30, December 31,
 Company 2013 2012
    (in thousands)
 APCo $ 135,579 $ 153,719
 I&M   143,804   123,447
 OPCo   321,054   300,675
 PSO   147,586   85,530
 SWEPCo   180,922   132,449

The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:

    Three Months Ended September 30, Nine Months Ended September 30,
 Company 2013 2012 2013 2012
    (in thousands)
 APCo $ 1,575 $ 1,703 $ 4,590 $ 5,389
 I&M   1,762   1,674   4,744   4,738
 OPCo   5,076   5,362   14,440   15,900
 PSO   1,549   1,990   4,314   5,547
 SWEPCo   1,649   1,786   4,413   4,720

The Registrant Subsidiaries' proceeds on the sale of receivables to AEP Credit were:

    Three Months Ended September 30, Nine Months Ended September 30,
 Company 2013 2012 2013 2012
    (in thousands)
 APCo $ 340,438 $ 351,570 $ 1,081,615 $ 993,975
 I&M   384,316   358,936   1,097,563   1,018,933
 OPCo   658,829   790,115   2,017,746   2,284,749
 PSO   382,167   342,819   944,062   919,343
 SWEPCo   450,294   444,461   1,171,306   1,145,182
Public Service Co Of Oklahoma [Member]
  
Financing Activities

11. FINANCING ACTIVITIES

 

Long-term Debt

 

Long-term debt and other securities issued, retired and principal payments made during the first nine months of 2013 are shown in the tables below:

      Principal  Interest  
 Company Type of Debt Amount Paid Rate Due Date
 Retirements and   (in thousands) (%)  
  Principal Payments:         
 APCo Land Note $ 21 13.718 2026
 APCo Pollution Control Bonds   30,000 4.85 2013
 APCo Pollution Control Bonds   40,000 4.85 2013
 APCo Senior Unsecured Notes   275,000 Variable 2013
 I&M Notes Payable   6,083 5.44 2013
 I&M Notes Payable   9,811 4.00 2014
 I&M Notes Payable   12,071 Variable 2015
 I&M Notes Payable   14,945 Variable 2016
 I&M Notes Payable   10,350 2.12 2016
 I&M Notes Payable   31,289 Variable 2016
 I&M Notes Payable   8,204 Variable 2017
 I&M Other Long-term Debt   705 6.00 2025
 I&M Other Long-term Debt   4,086 Variable 2015
 I&M Pollution Control Bonds   40,000 5.25 2025
 OPCo Other Long-term Debt   200,000(b)Variable 2015
 OPCo Pollution Control Bonds   56,000 5.10 2013
 OPCo Pollution Control Bonds   50,000 5.15 2026
 OPCo Pollution Control Bonds   65,000 4.90 2037
 OPCo Senior Unsecured Notes   250,000 5.50 2013
 OPCo Senior Unsecured Notes   250,000 5.50 2013
 OPCo Senior Unsecured Notes   250,000 5.75 2013
 OPCo Senior Unsecured Notes   225,000 6.38 2033
 PSO Notes Payable   301 3.00 2027
 SWEPCo Notes Payable   3,250 4.58 2032

(b)       Intercompany issuance from AEP consisting of a draw on a $1 billion term credit facility that was terminated in July 2013.

 

Dividend Restrictions

 

The Registrant Subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the Registrant Subsidiaries to transfer funds to Parent in the form of dividends.

 

Federal Power Act

 

The Federal Power Act prohibits each of the Registrant Subsidiaries from participating “in the making or paying of any dividends of such public utility from any funds properly included in capital account.” The term “capital account” is not defined in the Federal Power Act or its regulations. Management understands “capital account” to mean the book value of the common stock.

 

Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generating plants. Because of their respective ownership of such plants, this reserve applies to APCo, I&M and OPCo.

 

None of these restrictions limit the ability of the Registrant Subsidiaries to pay dividends out of retained earnings.

 

Leverage Restrictions

 

Pursuant to the credit agreement leverage restrictions, APCo, I&M and OPCo must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%.

Utility Money Pool – AEP System

 

The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of AEP's subsidiaries. The corporate borrowing program includes a Utility Money Pool, which funds AEP's utility subsidiaries, and a Nonutility Money Pool, which funds a majority of AEP's nonutility subsidiaries. The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with the FERC. The amounts of outstanding loans to (borrowings from) the Utility Money Pool as of September 30, 2013 and December 31, 2012 are included in Advances to Affiliates and Advances from Affiliates, respectively, on each of the Registrant Subsidiaries' condensed balance sheets. The Utility Money Pool participants' money pool activity and their corresponding authorized borrowing limits for the nine months ended September 30, 2013 are described in the following table:

               Net   
               Loans to   
   Maximum Maximum Average Average (Borrowings from) Authorized
   Borrowings Loans  Borrowings Loans  the Utility Short-term
   from the Utility to the Utility from the Utility to the Utility Money Pool as of Borrowing
 Company Money Pool Money Pool Money Pool Money Pool September 30, 2013 Limit
   (in thousands)
 APCo $ 331,771 $ 39,372 $ 126,391 $ 23,632 $ (253,352) $ 600,000
 I&M   23,135   384,435   8,308   239,647   322,476   500,000
 OPCo   410,456   415,605   228,719   59,047   9,401   600,000
 PSO   46,806   52,734   18,658   18,808   19,442   300,000
 SWEPCo   15,386   153,830   4,154   38,449   18,634   350,000

The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:

   Nine Months Ended September 30,
   2013 2012
 Maximum Interest Rate  0.43%  0.56%
 Minimum Interest Rate  0.28%  0.44%

The average interest rates for funds borrowed from and loaned to the Utility Money Pool for the nine months ended September 30, 2013 and 2012 are summarized for all Registrant Subsidiaries in the following table:

   Average Interest Rate  Average Interest Rate
   for Funds Borrowed   for Funds Loaned
   from the Utility Money Pool for   to the Utility Money Pool for
   Nine Months Ended September 30, Nine Months Ended September 30,
 Company 2013 20122013 2012
 APCo  0.33%  0.48%  0.34%  0.48%
 I&M  0.36%  -%  0.33%  0.47%
 OPCo  0.34%  0.47%  0.32%  0.50%
 PSO  0.34%  -%  0.32%  0.47%
 SWEPCo  0.33%  0.53%  0.36%  0.47%

Sale of Receivables – AEP Credit

 

Under a sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit's financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary's receivables. APCo does not have regulatory authority to sell its West Virginia accounts receivable. The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries' condensed statements of income. The Registrant Subsidiaries manage and service their customer accounts receivable sold.

 

In June 2013, AEP Credit amended its receivables securitization agreement. The agreement provides a commitment of $700 million from bank conduits to purchase receivables. AEP Credit amended a commitment of $385 million to now expire in June 2014. The remaining commitment of $315 million expires in June 2015.

 

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary as of September 30, 2013 and December 31, 2012 was as follows:

    September 30, December 31,
 Company 2013 2012
    (in thousands)
 APCo $ 135,579 $ 153,719
 I&M   143,804   123,447
 OPCo   321,054   300,675
 PSO   147,586   85,530
 SWEPCo   180,922   132,449

The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:

    Three Months Ended September 30, Nine Months Ended September 30,
 Company 2013 2012 2013 2012
    (in thousands)
 APCo $ 1,575 $ 1,703 $ 4,590 $ 5,389
 I&M   1,762   1,674   4,744   4,738
 OPCo   5,076   5,362   14,440   15,900
 PSO   1,549   1,990   4,314   5,547
 SWEPCo   1,649   1,786   4,413   4,720

The Registrant Subsidiaries' proceeds on the sale of receivables to AEP Credit were:

    Three Months Ended September 30, Nine Months Ended September 30,
 Company 2013 2012 2013 2012
    (in thousands)
 APCo $ 340,438 $ 351,570 $ 1,081,615 $ 993,975
 I&M   384,316   358,936   1,097,563   1,018,933
 OPCo   658,829   790,115   2,017,746   2,284,749
 PSO   382,167   342,819   944,062   919,343
 SWEPCo   450,294   444,461   1,171,306   1,145,182
Southwestern Electric Power Co [Member]
  
Financing Activities

11. FINANCING ACTIVITIES

 

Long-term Debt

 

Long-term debt and other securities issued, retired and principal payments made during the first nine months of 2013 are shown in the tables below:

      Principal  Interest  
 Company Type of Debt Amount Paid Rate Due Date
 Retirements and   (in thousands) (%)  
  Principal Payments:         
 APCo Land Note $ 21 13.718 2026
 APCo Pollution Control Bonds   30,000 4.85 2013
 APCo Pollution Control Bonds   40,000 4.85 2013
 APCo Senior Unsecured Notes   275,000 Variable 2013
 I&M Notes Payable   6,083 5.44 2013
 I&M Notes Payable   9,811 4.00 2014
 I&M Notes Payable   12,071 Variable 2015
 I&M Notes Payable   14,945 Variable 2016
 I&M Notes Payable   10,350 2.12 2016
 I&M Notes Payable   31,289 Variable 2016
 I&M Notes Payable   8,204 Variable 2017
 I&M Other Long-term Debt   705 6.00 2025
 I&M Other Long-term Debt   4,086 Variable 2015
 I&M Pollution Control Bonds   40,000 5.25 2025
 OPCo Other Long-term Debt   200,000(b)Variable 2015
 OPCo Pollution Control Bonds   56,000 5.10 2013
 OPCo Pollution Control Bonds   50,000 5.15 2026
 OPCo Pollution Control Bonds   65,000 4.90 2037
 OPCo Senior Unsecured Notes   250,000 5.50 2013
 OPCo Senior Unsecured Notes   250,000 5.50 2013
 OPCo Senior Unsecured Notes   250,000 5.75 2013
 OPCo Senior Unsecured Notes   225,000 6.38 2033
 PSO Notes Payable   301 3.00 2027
 SWEPCo Notes Payable   3,250 4.58 2032

(b)       Intercompany issuance from AEP consisting of a draw on a $1 billion term credit facility that was terminated in July 2013.

 

Dividend Restrictions

 

The Registrant Subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the Registrant Subsidiaries to transfer funds to Parent in the form of dividends.

 

Federal Power Act

 

The Federal Power Act prohibits each of the Registrant Subsidiaries from participating “in the making or paying of any dividends of such public utility from any funds properly included in capital account.” The term “capital account” is not defined in the Federal Power Act or its regulations. Management understands “capital account” to mean the book value of the common stock.

 

Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generating plants. Because of their respective ownership of such plants, this reserve applies to APCo, I&M and OPCo.

 

None of these restrictions limit the ability of the Registrant Subsidiaries to pay dividends out of retained earnings.

 

Leverage Restrictions

 

Pursuant to the credit agreement leverage restrictions, APCo, I&M and OPCo must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%.

Utility Money Pool – AEP System

 

The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of AEP's subsidiaries. The corporate borrowing program includes a Utility Money Pool, which funds AEP's utility subsidiaries, and a Nonutility Money Pool, which funds a majority of AEP's nonutility subsidiaries. The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with the FERC. The amounts of outstanding loans to (borrowings from) the Utility Money Pool as of September 30, 2013 and December 31, 2012 are included in Advances to Affiliates and Advances from Affiliates, respectively, on each of the Registrant Subsidiaries' condensed balance sheets. The Utility Money Pool participants' money pool activity and their corresponding authorized borrowing limits for the nine months ended September 30, 2013 are described in the following table:

               Net   
               Loans to   
   Maximum Maximum Average Average (Borrowings from) Authorized
   Borrowings Loans  Borrowings Loans  the Utility Short-term
   from the Utility to the Utility from the Utility to the Utility Money Pool as of Borrowing
 Company Money Pool Money Pool Money Pool Money Pool September 30, 2013 Limit
   (in thousands)
 APCo $ 331,771 $ 39,372 $ 126,391 $ 23,632 $ (253,352) $ 600,000
 I&M   23,135   384,435   8,308   239,647   322,476   500,000
 OPCo   410,456   415,605   228,719   59,047   9,401   600,000
 PSO   46,806   52,734   18,658   18,808   19,442   300,000
 SWEPCo   15,386   153,830   4,154   38,449   18,634   350,000

The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:

   Nine Months Ended September 30,
   2013 2012
 Maximum Interest Rate  0.43%  0.56%
 Minimum Interest Rate  0.28%  0.44%

The average interest rates for funds borrowed from and loaned to the Utility Money Pool for the nine months ended September 30, 2013 and 2012 are summarized for all Registrant Subsidiaries in the following table:

   Average Interest Rate  Average Interest Rate
   for Funds Borrowed   for Funds Loaned
   from the Utility Money Pool for   to the Utility Money Pool for
   Nine Months Ended September 30, Nine Months Ended September 30,
 Company 2013 20122013 2012
 APCo  0.33%  0.48%  0.34%  0.48%
 I&M  0.36%  -%  0.33%  0.47%
 OPCo  0.34%  0.47%  0.32%  0.50%
 PSO  0.34%  -%  0.32%  0.47%
 SWEPCo  0.33%  0.53%  0.36%  0.47%

Short-term Debt

 

The Registrant Subsidiaries' outstanding short-term debt was as follows:

      September 30, 2013 December 31, 2012
      Outstanding Interest Outstanding Interest
 Company Type of DebtAmountRate (a) AmountRate (a)
      (in thousands)    (in thousands)   
 SWEPCo Line of Credit – Sabine $ -  -% $ 2,603  1.82%

(a) Weighted average rate.

 

Credit Facilities

 

For a discussion of credit facilities, see “Letters of Credit” section of Note 4.

Sale of Receivables – AEP Credit

 

Under a sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit's financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary's receivables. APCo does not have regulatory authority to sell its West Virginia accounts receivable. The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries' condensed statements of income. The Registrant Subsidiaries manage and service their customer accounts receivable sold.

 

In June 2013, AEP Credit amended its receivables securitization agreement. The agreement provides a commitment of $700 million from bank conduits to purchase receivables. AEP Credit amended a commitment of $385 million to now expire in June 2014. The remaining commitment of $315 million expires in June 2015.

 

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary as of September 30, 2013 and December 31, 2012 was as follows:

    September 30, December 31,
 Company 2013 2012
    (in thousands)
 APCo $ 135,579 $ 153,719
 I&M   143,804   123,447
 OPCo   321,054   300,675
 PSO   147,586   85,530
 SWEPCo   180,922   132,449

The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:

    Three Months Ended September 30, Nine Months Ended September 30,
 Company 2013 2012 2013 2012
    (in thousands)
 APCo $ 1,575 $ 1,703 $ 4,590 $ 5,389
 I&M   1,762   1,674   4,744   4,738
 OPCo   5,076   5,362   14,440   15,900
 PSO   1,549   1,990   4,314   5,547
 SWEPCo   1,649   1,786   4,413   4,720

The Registrant Subsidiaries' proceeds on the sale of receivables to AEP Credit were:

    Three Months Ended September 30, Nine Months Ended September 30,
 Company 2013 2012 2013 2012
    (in thousands)
 APCo $ 340,438 $ 351,570 $ 1,081,615 $ 993,975
 I&M   384,316   358,936   1,097,563   1,018,933
 OPCo   658,829   790,115   2,017,746   2,284,749
 PSO   382,167   342,819   944,062   919,343
 SWEPCo   450,294   444,461   1,171,306   1,145,182