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Financing Activities
 3 Months Ended
Mar. 31, 2014
Financing Activities

11. FINANCING ACTIVITIES

 

Long-term Debt

 

The following table details long-term debt outstanding as of March 31, 2014 and December 31, 2013:

 Type of Debt March 31, 2014 December 31, 2013
   (in millions)
 Senior Unsecured Notes $ 11,571 $ 11,799
 Pollution Control Bonds   1,932   1,932
 Notes Payable   342   369
 Securitization Bonds   2,574   2,686
 Spent Nuclear Fuel Obligation (a)   265   265
 Other Long-term Debt    1,434   1,360
 Fair Value of Interest Rate Hedges   (7)   (9)
 Unamortized Discount, Net   (24)   (25)
 Total Long-term Debt Outstanding   18,087   18,377
 Long-term Debt Due Within One Year   1,612   1,549
 Long-term Debt  $ 16,475 $ 16,828

(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 $309 million as of March 31, 2014 and December 31, 2013, 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 three months of 2014 are shown in the tables below:

      Principal   Interest  
 Company Type of Debt Amount  Rate Due Date
 Issuances:  (in millions) (%)  
 PSO Other Long-term Debt $ 50  Variable 2016
             
 Non-Registrant:          
 Transource Missouri Other Long-term Debt   27  Variable 2018
 Total Issuances   $ 77(a)    

      Principal   Interest  
 Company Type of Debt Amount Paid  Rate Due Date
 Retirements and   (in millions) (%)  
  Principal Payments:          
 I&M Notes Payable $ 5  Variable 2016
 I&M Notes Payable   4  2.12 2016
 I&M Notes Payable   5  Variable 2016
 I&M Notes Payable   10  Variable 2017
 I&M Other Long-term Debt   2  Variable 2015
 OPCo Senior Unsecured Notes   225  4.85 2014
 SWEPCo Notes Payable   2  4.58 2032
             
 Non-Registrant:          
 AEGCo Senior Unsecured Notes   4  6.33 2037
 AEP Subsidiaries Notes Payable   1  Variable 2017
 TCC Securitization Bonds   72  5.09 2015
 TCC Securitization Bonds   40  6.25 2016
 Total Retirements and          
  Principal Payments   $ 370     

(a)       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 April 2014, I&M retired $13 million of Notes Payable related to DCC Fuel.

 

As of March 31, 2014, 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 primarily 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:

    March 31, 2014 December 31, 2013
    Outstanding Interest Outstanding Interest
 Type of DebtAmountRate (a) AmountRate (a)
   (in millions)    (in millions)   
 Securitized Debt for Receivables (b) $ 700  0.24% $ 700  0.23%
 Commercial Paper   632  0.31%   57  0.29%
 Total Short-term Debt $ 1,332    $ 757   

(a)       Weighted average rate.

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

 

Credit Facilities

 

For an additional discussion of credit facilities, see “Letters of Credit” section of Note 5.

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.

 

Our receivables securitization agreement provides a commitment of $700 million from bank conduits to purchase receivables. A commitment of $385 million expires in June 2014. The remaining commitment of $315 million expires in June 2015. We intend to extend or replace the agreement expiring in June 2014 on or before its maturity.

 

Accounts receivable information for AEP Credit is as follows:

    Three Months Ended  
    March 31, 
    2014 2013 
   (dollars in millions) 
 Effective Interest Rates on Securitization of Accounts Receivable   0.24%  0.23%
 Net Uncollectible Accounts Receivable Written Off $ 8 $ 7 

    March 31, December 31,
    2014 2013
    (in millions)
 Accounts Receivable Retained Interest and Pledged as Collateral      
  Less Uncollectible Accounts $ 997 $ 929
 Total Principal Outstanding   700   700
 Delinquent Securitized Accounts Receivable   55   45
 Bad Debt Reserves Related to Securitization/Sale of Accounts Receivable   17   16
 Unbilled Receivables Related to Securitization/Sale of Accounts Receivable   278   331

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 three months of 2014 are shown in the tables below:

     Principal  Interest  
 Company Type of Debt Amount (a) Rate Due Date
 Issuances:   (in thousands) (%)  
 PSO Other Long-term Debt $ 50,000 Variable 2016

      Principal  Interest  
 Company Type of Debt Amount Paid Rate Due Date
 Retirements and   (in thousands) (%)  
  Principal Payments:         
 APCo Land Note $ 8 13.718 2026
 I&M Notes Payable   9,866 Variable 2017
 I&M Notes Payable   5,324 Variable 2016
 I&M Notes Payable   5,214 Variable 2016
 I&M Notes Payable   3,611 2.12 2016
 I&M Other Long-term Debt   2,063 Variable 2015
 I&M Other Long-term Debt   259 6.00 2025
 OPCo Other Long-term Debt   29 1.149 2028
 OPCo Senior Unsecured Notes   225,000 4.85 2014
 PSO Other Long-term Debt   102 3.00 2027
 SWEPCo Notes Payable   1,625 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.

 

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 generation plants. Because of their respective ownership of such plants, this reserve applies to APCo and I&M.

 

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 PSO 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 March 31, 2014 and December 31, 2013 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 three months ended March 31, 2014 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 March 31, 2014 Limit
   (in thousands)
 APCo $ - $ 249,630 $ - $ 164,681 $ 245,516 $ 600,000
 I&M   -   158,857   -   92,303   59,162   500,000
 OPCo   55,640   405,350   25,930   135,747   (27,108)   600,000
 PSO   121,100   -   58,500   -   (70,119)   300,000
 SWEPCo   130,258   -   61,132   -   (117,342)   350,000

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

   Three Months Ended March 31,
   2014 2013
 Maximum Interest Rate  0.33%  0.43%
 Minimum Interest Rate  0.28%  0.35%

The average interest rates for funds borrowed from and loaned to the Utility Money Pool for the three months ended March 31, 2014 and 2013 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
   Three Months Ended March 31, Three Months Ended March 31,
 Company 2014 20132014 2013
 APCo  -%  0.38%  0.31%  0.37%
 I&M  -%  0.36%  0.31%  0.37%
 OPCo  0.31%  0.36%  0.29%  0.37%
 PSO  0.31%  0.36%  -%  0.38%
 SWEPCo  0.31%  -%  -%  0.38%

Credit Facilities

 

For a discussion of credit facilities, see “Letters of Credit” section of Note 5.

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.

 

AEP Credit's receivables securitization agreement provides a commitment of $700 million from bank conduits to purchase receivables. A commitment of $385 million expires in June 2014. The remaining commitment of $315 million expires in June 2015. AEP Credit intends to extend or replace the agreement expiring in June 2014 on or before its maturity.

 

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary as of March 31, 2014 and December 31, 2013 was as follows:

    March 31, December 31,
 Company 2014 2013
    (in thousands)
 APCo $ 175,738 $ 156,599
 I&M   154,510   139,257
 OPCo   350,735   324,287
 PSO   111,522   115,260
 SWEPCo   145,648   149,337

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

    Three Months Ended March 31,
 Company 2014 2013
    (in thousands)
 APCo $ 2,423 $ 1,556
 I&M   2,040   1,452
 OPCo   7,498   4,669
 PSO   1,323   1,414
 SWEPCo   1,566   1,380

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

    Three Months Ended March 31,
 Company 2014 2013
    (in thousands)
 APCo $ 437,196 $ 398,193
 I&M   407,150   351,830
 OPCo   686,627   696,958
 PSO   290,217   240,275
 SWEPCo   390,588   331,936
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 three months of 2014 are shown in the tables below:

     Principal  Interest  
 Company Type of Debt Amount (a) Rate Due Date
 Issuances:   (in thousands) (%)  
 PSO Other Long-term Debt $ 50,000 Variable 2016

      Principal  Interest  
 Company Type of Debt Amount Paid Rate Due Date
 Retirements and   (in thousands) (%)  
  Principal Payments:         
 APCo Land Note $ 8 13.718 2026
 I&M Notes Payable   9,866 Variable 2017
 I&M Notes Payable   5,324 Variable 2016
 I&M Notes Payable   5,214 Variable 2016
 I&M Notes Payable   3,611 2.12 2016
 I&M Other Long-term Debt   2,063 Variable 2015
 I&M Other Long-term Debt   259 6.00 2025
 OPCo Other Long-term Debt   29 1.149 2028
 OPCo Senior Unsecured Notes   225,000 4.85 2014
 PSO Other Long-term Debt   102 3.00 2027
 SWEPCo Notes Payable   1,625 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.

In April 2014, I&M retired $13 million of Notes Payable related to DCC Fuel.

 

As of March 31, 2014, 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 generation plants. Because of their respective ownership of such plants, this reserve applies to APCo and I&M.

 

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 PSO 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 March 31, 2014 and December 31, 2013 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 three months ended March 31, 2014 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 March 31, 2014 Limit
   (in thousands)
 APCo $ - $ 249,630 $ - $ 164,681 $ 245,516 $ 600,000
 I&M   -   158,857   -   92,303   59,162   500,000
 OPCo   55,640   405,350   25,930   135,747   (27,108)   600,000
 PSO   121,100   -   58,500   -   (70,119)   300,000
 SWEPCo   130,258   -   61,132   -   (117,342)   350,000

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

   Three Months Ended March 31,
   2014 2013
 Maximum Interest Rate  0.33%  0.43%
 Minimum Interest Rate  0.28%  0.35%

The average interest rates for funds borrowed from and loaned to the Utility Money Pool for the three months ended March 31, 2014 and 2013 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
   Three Months Ended March 31, Three Months Ended March 31,
 Company 2014 20132014 2013
 APCo  -%  0.38%  0.31%  0.37%
 I&M  -%  0.36%  0.31%  0.37%
 OPCo  0.31%  0.36%  0.29%  0.37%
 PSO  0.31%  0.36%  -%  0.38%
 SWEPCo  0.31%  -%  -%  0.38%

Credit Facilities

 

For a discussion of credit facilities, see “Letters of Credit” section of Note 5.

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.

 

AEP Credit's receivables securitization agreement provides a commitment of $700 million from bank conduits to purchase receivables. A commitment of $385 million expires in June 2014. The remaining commitment of $315 million expires in June 2015. AEP Credit intends to extend or replace the agreement expiring in June 2014 on or before its maturity.

 

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary as of March 31, 2014 and December 31, 2013 was as follows:

    March 31, December 31,
 Company 2014 2013
    (in thousands)
 APCo $ 175,738 $ 156,599
 I&M   154,510   139,257
 OPCo   350,735   324,287
 PSO   111,522   115,260
 SWEPCo   145,648   149,337

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

    Three Months Ended March 31,
 Company 2014 2013
    (in thousands)
 APCo $ 2,423 $ 1,556
 I&M   2,040   1,452
 OPCo   7,498   4,669
 PSO   1,323   1,414
 SWEPCo   1,566   1,380

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

    Three Months Ended March 31,
 Company 2014 2013
    (in thousands)
 APCo $ 437,196 $ 398,193
 I&M   407,150   351,830
 OPCo   686,627   696,958
 PSO   290,217   240,275
 SWEPCo   390,588   331,936
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 three months of 2014 are shown in the tables below:

     Principal  Interest  
 Company Type of Debt Amount (a) Rate Due Date
 Issuances:   (in thousands) (%)  
 PSO Other Long-term Debt $ 50,000 Variable 2016

      Principal  Interest  
 Company Type of Debt Amount Paid Rate Due Date
 Retirements and   (in thousands) (%)  
  Principal Payments:         
 APCo Land Note $ 8 13.718 2026
 I&M Notes Payable   9,866 Variable 2017
 I&M Notes Payable   5,324 Variable 2016
 I&M Notes Payable   5,214 Variable 2016
 I&M Notes Payable   3,611 2.12 2016
 I&M Other Long-term Debt   2,063 Variable 2015
 I&M Other Long-term Debt   259 6.00 2025
 OPCo Other Long-term Debt   29 1.149 2028
 OPCo Senior Unsecured Notes   225,000 4.85 2014
 PSO Other Long-term Debt   102 3.00 2027
 SWEPCo Notes Payable   1,625 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.

 

As of March 31, 2014, 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 generation plants. Because of their respective ownership of such plants, this reserve applies to APCo and I&M.

 

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 PSO 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 March 31, 2014 and December 31, 2013 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 three months ended March 31, 2014 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 March 31, 2014 Limit
   (in thousands)
 APCo $ - $ 249,630 $ - $ 164,681 $ 245,516 $ 600,000
 I&M   -   158,857   -   92,303   59,162   500,000
 OPCo   55,640   405,350   25,930   135,747   (27,108)   600,000
 PSO   121,100   -   58,500   -   (70,119)   300,000
 SWEPCo   130,258   -   61,132   -   (117,342)   350,000

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

   Three Months Ended March 31,
   2014 2013
 Maximum Interest Rate  0.33%  0.43%
 Minimum Interest Rate  0.28%  0.35%

The average interest rates for funds borrowed from and loaned to the Utility Money Pool for the three months ended March 31, 2014 and 2013 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
   Three Months Ended March 31, Three Months Ended March 31,
 Company 2014 20132014 2013
 APCo  -%  0.38%  0.31%  0.37%
 I&M  -%  0.36%  0.31%  0.37%
 OPCo  0.31%  0.36%  0.29%  0.37%
 PSO  0.31%  0.36%  -%  0.38%
 SWEPCo  0.31%  -%  -%  0.38%

Credit Facilities

 

For a discussion of credit facilities, see “Letters of Credit” section of Note 5.

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.

 

AEP Credit's receivables securitization agreement provides a commitment of $700 million from bank conduits to purchase receivables. A commitment of $385 million expires in June 2014. The remaining commitment of $315 million expires in June 2015. AEP Credit intends to extend or replace the agreement expiring in June 2014 on or before its maturity.

 

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary as of March 31, 2014 and December 31, 2013 was as follows:

    March 31, December 31,
 Company 2014 2013
    (in thousands)
 APCo $ 175,738 $ 156,599
 I&M   154,510   139,257
 OPCo   350,735   324,287
 PSO   111,522   115,260
 SWEPCo   145,648   149,337

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

    Three Months Ended March 31,
 Company 2014 2013
    (in thousands)
 APCo $ 2,423 $ 1,556
 I&M   2,040   1,452
 OPCo   7,498   4,669
 PSO   1,323   1,414
 SWEPCo   1,566   1,380

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

    Three Months Ended March 31,
 Company 2014 2013
    (in thousands)
 APCo $ 437,196 $ 398,193
 I&M   407,150   351,830
 OPCo   686,627   696,958
 PSO   290,217   240,275
 SWEPCo   390,588   331,936
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 three months of 2014 are shown in the tables below:

     Principal  Interest  
 Company Type of Debt Amount (a) Rate Due Date
 Issuances:   (in thousands) (%)  
 PSO Other Long-term Debt $ 50,000 Variable 2016

      Principal  Interest  
 Company Type of Debt Amount Paid Rate Due Date
 Retirements and   (in thousands) (%)  
  Principal Payments:         
 APCo Land Note $ 8 13.718 2026
 I&M Notes Payable   9,866 Variable 2017
 I&M Notes Payable   5,324 Variable 2016
 I&M Notes Payable   5,214 Variable 2016
 I&M Notes Payable   3,611 2.12 2016
 I&M Other Long-term Debt   2,063 Variable 2015
 I&M Other Long-term Debt   259 6.00 2025
 OPCo Other Long-term Debt   29 1.149 2028
 OPCo Senior Unsecured Notes   225,000 4.85 2014
 PSO Other Long-term Debt   102 3.00 2027
 SWEPCo Notes Payable   1,625 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.

 

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 generation plants. Because of their respective ownership of such plants, this reserve applies to APCo and I&M.

 

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 PSO 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 March 31, 2014 and December 31, 2013 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 three months ended March 31, 2014 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 March 31, 2014 Limit
   (in thousands)
 APCo $ - $ 249,630 $ - $ 164,681 $ 245,516 $ 600,000
 I&M   -   158,857   -   92,303   59,162   500,000
 OPCo   55,640   405,350   25,930   135,747   (27,108)   600,000
 PSO   121,100   -   58,500   -   (70,119)   300,000
 SWEPCo   130,258   -   61,132   -   (117,342)   350,000

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

   Three Months Ended March 31,
   2014 2013
 Maximum Interest Rate  0.33%  0.43%
 Minimum Interest Rate  0.28%  0.35%

The average interest rates for funds borrowed from and loaned to the Utility Money Pool for the three months ended March 31, 2014 and 2013 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
   Three Months Ended March 31, Three Months Ended March 31,
 Company 2014 20132014 2013
 APCo  -%  0.38%  0.31%  0.37%
 I&M  -%  0.36%  0.31%  0.37%
 OPCo  0.31%  0.36%  0.29%  0.37%
 PSO  0.31%  0.36%  -%  0.38%
 SWEPCo  0.31%  -%  -%  0.38%

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.

 

AEP Credit's receivables securitization agreement provides a commitment of $700 million from bank conduits to purchase receivables. A commitment of $385 million expires in June 2014. The remaining commitment of $315 million expires in June 2015. AEP Credit intends to extend or replace the agreement expiring in June 2014 on or before its maturity.

 

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary as of March 31, 2014 and December 31, 2013 was as follows:

    March 31, December 31,
 Company 2014 2013
    (in thousands)
 APCo $ 175,738 $ 156,599
 I&M   154,510   139,257
 OPCo   350,735   324,287
 PSO   111,522   115,260
 SWEPCo   145,648   149,337

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

    Three Months Ended March 31,
 Company 2014 2013
    (in thousands)
 APCo $ 2,423 $ 1,556
 I&M   2,040   1,452
 OPCo   7,498   4,669
 PSO   1,323   1,414
 SWEPCo   1,566   1,380

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

    Three Months Ended March 31,
 Company 2014 2013
    (in thousands)
 APCo $ 437,196 $ 398,193
 I&M   407,150   351,830
 OPCo   686,627   696,958
 PSO   290,217   240,275
 SWEPCo   390,588   331,936
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 three months of 2014 are shown in the tables below:

     Principal  Interest  
 Company Type of Debt Amount (a) Rate Due Date
 Issuances:   (in thousands) (%)  
 PSO Other Long-term Debt $ 50,000 Variable 2016

      Principal  Interest  
 Company Type of Debt Amount Paid Rate Due Date
 Retirements and   (in thousands) (%)  
  Principal Payments:         
 APCo Land Note $ 8 13.718 2026
 I&M Notes Payable   9,866 Variable 2017
 I&M Notes Payable   5,324 Variable 2016
 I&M Notes Payable   5,214 Variable 2016
 I&M Notes Payable   3,611 2.12 2016
 I&M Other Long-term Debt   2,063 Variable 2015
 I&M Other Long-term Debt   259 6.00 2025
 OPCo Other Long-term Debt   29 1.149 2028
 OPCo Senior Unsecured Notes   225,000 4.85 2014
 PSO Other Long-term Debt   102 3.00 2027
 SWEPCo Notes Payable   1,625 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.

 

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 generation plants. Because of their respective ownership of such plants, this reserve applies to APCo and I&M.

 

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 PSO 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 March 31, 2014 and December 31, 2013 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 three months ended March 31, 2014 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 March 31, 2014 Limit
   (in thousands)
 APCo $ - $ 249,630 $ - $ 164,681 $ 245,516 $ 600,000
 I&M   -   158,857   -   92,303   59,162   500,000
 OPCo   55,640   405,350   25,930   135,747   (27,108)   600,000
 PSO   121,100   -   58,500   -   (70,119)   300,000
 SWEPCo   130,258   -   61,132   -   (117,342)   350,000

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

   Three Months Ended March 31,
   2014 2013
 Maximum Interest Rate  0.33%  0.43%
 Minimum Interest Rate  0.28%  0.35%

The average interest rates for funds borrowed from and loaned to the Utility Money Pool for the three months ended March 31, 2014 and 2013 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
   Three Months Ended March 31, Three Months Ended March 31,
 Company 2014 20132014 2013
 APCo  -%  0.38%  0.31%  0.37%
 I&M  -%  0.36%  0.31%  0.37%
 OPCo  0.31%  0.36%  0.29%  0.37%
 PSO  0.31%  0.36%  -%  0.38%
 SWEPCo  0.31%  -%  -%  0.38%

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.

 

AEP Credit's receivables securitization agreement provides a commitment of $700 million from bank conduits to purchase receivables. A commitment of $385 million expires in June 2014. The remaining commitment of $315 million expires in June 2015. AEP Credit intends to extend or replace the agreement expiring in June 2014 on or before its maturity.

 

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary as of March 31, 2014 and December 31, 2013 was as follows:

    March 31, December 31,
 Company 2014 2013
    (in thousands)
 APCo $ 175,738 $ 156,599
 I&M   154,510   139,257
 OPCo   350,735   324,287
 PSO   111,522   115,260
 SWEPCo   145,648   149,337

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

    Three Months Ended March 31,
 Company 2014 2013
    (in thousands)
 APCo $ 2,423 $ 1,556
 I&M   2,040   1,452
 OPCo   7,498   4,669
 PSO   1,323   1,414
 SWEPCo   1,566   1,380

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

    Three Months Ended March 31,
 Company 2014 2013
    (in thousands)
 APCo $ 437,196 $ 398,193
 I&M   407,150   351,830
 OPCo   686,627   696,958
 PSO   290,217   240,275
 SWEPCo   390,588   331,936