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Fair Value Measurements

12 Months Ended

Dec. 31, 2022

FAIR VALUE MEASUREMENTS

The disclosures in this note apply to all Registrants except AEPTCo unless indicated otherwise.

Fair Value Measurements of Long-term Debt (Applies to all Registrants)

The fair values of Long-term Debt are based on quoted market prices, without credit enhancements, for the same or similar issues and the current interest rates offered for instruments with similar maturities classified as Level 2 measurement inputs. These instruments are not marked-to-market. The estimates presented are not necessarily indicative of the amounts that could be realized in a current market exchange. The fair value of AEP’s Equity Units (Level 1) are valued based on publicly-traded securities issued by AEP.

The book values and fair values of Long-term Debt are summarized in the following table:


	December 31,
	2022				2021
Company	Book Value		Fair Value		Book Value		Fair Value
	(in millions)
AEP (a)(b)(c)	$	35,622.6	$	31,767.1	$	33,454.5	$	37,564.7
AEP Texas	5,657.8		5,045.8		5,180.8		5,663.8
AEPTCo	4,782.8		3,940.5		4,343.9		4,968.2
APCo	5,410.5		5,079.2		4,938.9		6,037.1
I&M	3,260.8		2,929.0		3,195.0		3,748.0
OPCo	2,970.3		2,516.6		2,968.5		3,437.5
PSO	1,912.8		1,635.8		1,913.5		2,163.7
SWEPCo	3,391.6		2,870.9		3,395.2		3,792.9

(a)The fair value amounts include debt related to AEP’s Equity Units and had a fair value of $877 million and $1.7 billion as of December 31, 2022 and 2021, respectively. See “Equity Units” section of Note 14 for additional information.

(b)The 2022 and 2021 book value amounts exclude Long-term Debt of $1.2 billion and $1.1 billion, respectively, classified as Liabilities Held for Sale on the balance sheets. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

(c)The 2022 and 2021 fair value amounts exclude Long-term Debt of $1.1 billion and $1.2 billion, respectively, related to KPCo. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

Fair Value Measurements of Other Temporary Investments (Applies to AEP)

Other Temporary Investments include marketable securities that management intends to hold for less than one year and investments by AEP’s protected cell of EIS. See “Other Temporary Investments” section of Note 1 for additional information.

The following is a summary of Other Temporary Investments and Restricted Cash:


	December 31, 2022
			Gross		Gross
			Unrealized		Unrealized		Fair
Other Temporary Investments and Restricted Cash	Cost		Gains		Losses		Value
	(in millions)
Restricted Cash (a)	$	47.1	$	—	$	—	$	47.1
Other Cash Deposits	9.0		—		—		9.0
Fixed Income Securities – Mutual Funds (b)	152.4		—		(8.3)		144.1
Equity Securities – Mutual Funds	15.0		19.4		—		34.4
Total Other Temporary Investments and Restricted Cash	$	223.5	$	19.4	$	(8.3)	$	234.6


	December 31, 2021
			Gross		Gross
			Unrealized		Unrealized		Fair
Other Temporary Investments and Restricted Cash	Cost		Gains		Losses		Value
	(in millions)
Restricted Cash (a)	$	48.0	$	—	$	—	$	48.0
Other Cash Deposits	10.0		—		—		10.0
Fixed Income Securities – Mutual Funds (b)	154.3		0.5		—		154.8
Equity Securities – Mutual Funds	19.7		35.9		—		55.6
Total Other Temporary Investments and Restricted Cash	$	232.0	$	36.4	$	—	$	268.4

(a)Primarily represents amounts held for the repayment of debt.

(b)Primarily short and intermediate maturities which may be sold and do not contain maturity dates.

The following table provides the activity for fixed income and equity securities within Other Temporary Investments:


	Years Ended December 31,
	2022		2021		2020
	(in millions)
Proceeds from Investment Sales	$	30.2	$	15.0	$	50.9
Purchases of Investments	18.8		26.9		41.6
Gross Realized Gains on Investment Sales	6.1		3.6		3.8
Gross Realized Losses on Investment Sales	1.3		—		0.2

Fair Value Measurements of Trust Assets for Decommissioning and SNF Disposal (Applies to AEP and I&M)

Securities held in trust funds for decommissioning nuclear facilities and for the disposal of SNF are recorded at fair value. See “Nuclear Trust Funds” section of Note 1 for additional information.

The following is a summary of nuclear trust fund investments:


	December 31,
	2022						2021
			Gross		Other-Than-				Gross		Other-Than-
	Fair		Unrealized		Temporary		Fair		Unrealized		Temporary
	Value		Gains		Impairments		Value		Gains		Impairments
	(in millions)
Cash and Cash Equivalents	$	21.2	$	—	$	—	$	84.7	$	—	$	—
Fixed Income Securities:
United States Government	1,123.8		(3.1)		(18.8)		1,156.4		66.3		(7.9)
Corporate Debt	61.6		(7.0)		(9.6)		76.7		6.7		(2.1)
State and Local Government	3.3		0.1		(0.1)		7.3		0.4		(0.1)
Subtotal Fixed Income Securities	1,188.7		(10.0)		(28.5)		1,240.4		73.4		(10.1)
Equity Securities - Domestic (a)	2,131.3		1,477.3		—		2,541.9		1,901.3		—
Spent Nuclear Fuel and Decommissioning Trusts	$	3,341.2	$	1,467.3	$	(28.5)	$	3,867.0	$	1,974.7	$	(10.1)

(a)Amount reported as Gross Unrealized Gains includes unrealized gains of $1.5 billion and $1.9 billion and unrealized losses of $6 million and $4 million as of December 31, 2022 and 2021, respectively.

The following table provides the securities activity within the decommissioning and SNF trusts:


	Years Ended December 31,
	2022		2021		2020
	(in millions)
Proceeds from Investment Sales	$	2,713.6	$	1,886.4	$	1,593.4
Purchases of Investments	2,765.4		1,928.2		1,637.2
Gross Realized Gains on Investment Sales	52.4		103.2		26.4
Gross Realized Losses on Investment Sales	42.6		16.5		26.1

The base cost of fixed income securities was $1.2 billion and $1.2 billion as of December 31, 2022 and 2021, respectively. The base cost of equity securities was $654 million and $641 million as of December 31, 2022 and 2021, respectively.

The fair value of fixed income securities held in the nuclear trust funds, summarized by contractual maturities, as of December 31, 2022 was as follows:


	Fair Value of Fixed
	Income Securities
	(in millions)
Within 1 year	$	365.2
After 1 year through 5 years	425.4
After 5 years through 10 years	203.0
After 10 years	195.1
Total	$	1,188.7

Fair Value Measurements of Financial Assets and Liabilities

For a discussion of fair value accounting and the classification of assets and liabilities within the fair value hierarchy, see the “Fair Value Measurements of Assets and Liabilities” section of Note 1.

The following tables set forth, by level within the fair value hierarchy, the Registrants’ financial assets and liabilities that were accounted for at fair value on a recurring basis. As required by the accounting guidance for “Fair Value Measurements and Disclosures,” financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Management’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. There have not been any significant changes in management’s valuation techniques.

AEP


	December 31, 2022
	Level 1		Level 2		Level 3		Other		Total
Assets:	(in millions)



Other Temporary Investments and Restricted Cash
Restricted Cash	$	47.1	$	—	$	—	$	—	$	47.1
Other Cash Deposits (a)	—		—		—		9.0		9.0
Fixed Income Securities – Mutual Funds	144.1		—		—		—		144.1
Equity Securities – Mutual Funds (b)	34.4		—		—		—		34.4
Total Other Temporary Investments and Restricted Cash	225.6		—		—		9.0		234.6

Risk Management Assets
Risk Management Commodity Contracts (c) (d) (i)	15.0		1,197.4		305.8		(1,211.3)		306.9
Cash Flow Hedges:
Commodity Hedges (c)	—		332.7		26.7		(52.8)		306.6
Interest Rate Hedges	—		11.0		—		—		11.0

Total Risk Management Assets	15.0		1,541.1		332.5		(1,264.1)		624.5

Spent Nuclear Fuel and Decommissioning Trusts
Cash and Cash Equivalents (e)	11.3		—		—		9.9		21.2
Fixed Income Securities:
United States Government	—		1,123.8		—		—		1,123.8
Corporate Debt	—		61.6		—		—		61.6
State and Local Government	—		3.3		—		—		3.3
Subtotal Fixed Income Securities	—		1,188.7		—		—		1,188.7
Equity Securities – Domestic (b)	2,131.3		—		—		—		2,131.3
Total Spent Nuclear Fuel and Decommissioning Trusts	2,142.6		1,188.7		—		9.9		3,341.2



Total Assets	$	2,383.2	$	2,729.8	$	332.5	$	(1,245.2)	$	4,200.3

Liabilities:

Risk Management Liabilities
Risk Management Commodity Contracts (c) (d) (j)	$	21.8	$	870.7	$	178.9	$	(731.6)	$	339.8
Cash Flow Hedges:
Commodity Hedges (c)	—		74.4		1.7		(52.8)		23.3

Fair Value Hedges	—		127.4		—		—		127.4
Total Risk Management Liabilities	$	21.8	$	1,072.5	$	180.6	$	(784.4)	$	490.5

AEP


	December 31, 2021
	Level 1		Level 2		Level 3		Other		Total
Assets:	(in millions)



Other Temporary Investments and Restricted Cash
Restricted Cash	$	48.0	$	—	$	—	$	—	$	48.0
Other Cash Deposits (a)	—		—		—		10.0		10.0
Fixed Income Securities – Mutual Funds	154.8		—		—		—		154.8
Equity Securities – Mutual Funds (b)	55.6		—		—		—		55.6
Total Other Temporary Investments and Restricted Cash	258.4		—		—		10.0		268.4

Risk Management Assets
Risk Management Commodity Contracts (c) (f) (i)	7.4		648.5		226.3		(642.4)		239.8
Cash Flow Hedges:
Commodity Hedges (c)	—		242.9		19.2		(41.7)		220.4

Fair Value Hedges	—		1.2		—		—		1.2
Total Risk Management Assets	7.4		892.6		245.5		(684.1)		461.4

Spent Nuclear Fuel and Decommissioning Trusts
Cash and Cash Equivalents (e)	77.7		—		—		7.0		84.7
Fixed Income Securities:
United States Government	—		1,156.4		—		—		1,156.4
Corporate Debt	—		76.7		—		—		76.7
State and Local Government	—		7.3		—		—		7.3
Subtotal Fixed Income Securities	—		1,240.4		—		—		1,240.4
Equity Securities – Domestic (b)	2,541.9		—		—		—		2,541.9
Total Spent Nuclear Fuel and Decommissioning Trusts	2,619.6		1,240.4		—		7.0		3,867.0

Other Investments (h)	28.8		14.9		—		—		43.7

Total Assets	$	2,914.2	$	2,147.9	$	245.5	$	(667.1)	$	4,640.5

Liabilities:

Risk Management Liabilities
Risk Management Commodity Contracts (c) (f) (j)	$	5.3	$	485.0	$	147.6	$	(383.2)	$	254.7
Cash Flow Hedges:
Commodity Hedges (c)	—		54.0		0.6		(41.7)		12.9

Fair Value Hedges	—		38.1		—		—		38.1
Total Risk Management Liabilities	$	5.3	$	577.1	$	148.2	$	(424.9)	$	305.7

AEP Texas


	December 31, 2022
	Level 1		Level 2		Level 3		Other		Total
Assets:	(in millions)

Restricted Cash for Securitized Funding	$	32.7	$	—	$	—	$	—	$	32.7


	December 31, 2021
	Level 1		Level 2		Level 3		Other		Total
Assets:	(in millions)

Restricted Cash for Securitized Funding	$	30.4	$	—	$	—	$	—	$	30.4

Risk Management Assets
Risk Management Commodity Contracts (c)	—		0.6		—		(0.6)		—

Total Assets	$	30.4	$	0.6	$	—	$	(0.6)	$	30.4

APCo


	December 31, 2022
	Level 1		Level 2		Level 3		Other		Total
Assets:	(in millions)

Restricted Cash for Securitized Funding	$	14.4	$	—	$	—	$	—	$	14.4

Risk Management Assets
Risk Management Commodity Contracts (c) (g)	—		0.7		69.4		(1.0)		69.1




Total Assets	$	14.4	$	0.7	$	69.4	$	(1.0)	$	83.5

Liabilities:

Risk Management Liabilities
Risk Management Commodity Contracts (c) (g)	$	—	$	4.6	$	0.3	$	(1.4)	$	3.5


	December 31, 2021
	Level 1		Level 2		Level 3		Other		Total
Assets:	(in millions)

Restricted Cash for Securitized Funding	$	17.6	$	—	$	—	$	—	$	17.6

Risk Management Assets
Risk Management Commodity Contracts (c) (g)	—		5.8		42.0		(5.8)		42.0




Total Assets	$	17.6	$	5.8	$	42.0	$	(5.8)	$	59.6

Liabilities:

Risk Management Liabilities
Risk Management Commodity Contracts (c) (g)	$	—	$	7.2	$	0.3	$	(6.7)	$	0.8

I&M


	December 31, 2022
	Level 1		Level 2		Level 3		Other		Total
Assets:	(in millions)

Risk Management Assets
Risk Management Commodity Contracts (c) (g)	$	—	$	11.3	$	5.3	$	(1.2)	$	15.4

Spent Nuclear Fuel and Decommissioning Trusts
Cash and Cash Equivalents (e)	11.3		—		—		9.9		21.2
Fixed Income Securities:
United States Government	—		1,123.8		—		—		1,123.8
Corporate Debt	—		61.6		—		—		61.6
State and Local Government	—		3.3		—		—		3.3
Subtotal Fixed Income Securities	—		1,188.7		—		—		1,188.7
Equity Securities - Domestic (b)	2,131.3		—		—		—		2,131.3
Total Spent Nuclear Fuel and Decommissioning Trusts	2,142.6		1,188.7		—		9.9		3,341.2

Total Assets	$	2,142.6	$	1,200.0	$	5.3	$	8.7	$	3,356.6

Liabilities:

Risk Management Liabilities
Risk Management Commodity Contracts (c) (g)	$	—	$	0.6	$	0.7	$	(1.3)	$	—


	December 31, 2021
	Level 1		Level 2		Level 3		Other		Total
Assets:	(in millions)

Risk Management Assets
Risk Management Commodity Contracts (c) (g)	$	—	$	3.8	$	7.6	$	(8.1)	$	3.3

Spent Nuclear Fuel and Decommissioning Trusts
Cash and Cash Equivalents (e)	77.7		—		—		7.0		84.7
Fixed Income Securities:
United States Government	—		1,156.4		—		—		1,156.4
Corporate Debt	—		76.7		—		—		76.7
State and Local Government	—		7.3		—		—		7.3
Subtotal Fixed Income Securities	—		1,240.4		—		—		1,240.4
Equity Securities - Domestic (b)	2,541.9		—		—		—		2,541.9
Total Spent Nuclear Fuel and Decommissioning Trusts	2,619.6		1,240.4		—		7.0		3,867.0

Total Assets	$	2,619.6	$	1,244.2	$	7.6	$	(1.1)	$	3,870.3

Liabilities:

Risk Management Liabilities
Risk Management Commodity Contracts (c) (g)	$	—	$	6.7	$	8.3	$	(10.0)	$	5.0

OPCo


	December 31, 2022
	Level 1		Level 2		Level 3		Other		Total
Assets:	(in millions)



Risk Management Assets
Risk Management Commodity Contracts (c) (g)	$	—	$	—	$	—	$	—	$	—



Liabilities:

Risk Management Liabilities
Risk Management Commodity Contracts (c) (g)	$	—	$	—	$	40.0	$	(0.3)	$	39.7


	December 31, 2021
	Level 1		Level 2		Level 3		Other		Total
Assets:	(in millions)



Risk Management Assets
Risk Management Commodity Contracts (c) (g)	$	—	$	0.5	$	—	$	(0.5)	$	—



Liabilities:

Risk Management Liabilities
Risk Management Commodity Contracts (c) (g)	$	—	$	—	$	92.5	$	—	$	92.5

PSO


	December 31, 2022
	Level 1		Level 2		Level 3		Other		Total
Assets:	(in millions)

Risk Management Assets
Risk Management Commodity Contracts (c) (g)	$	—	$	—	$	24.0	$	1.3	$	25.3
Cash Flow Hedges:
Interest Rate Hedges	—		1.6		—		(1.6)		—
Total Assets	$	—	$	1.6	$	24.0	$	(0.3)	$	25.3

Liabilities:

Risk Management Liabilities
Risk Management Commodity Contracts (c) (g)	$	—	$	1.7	$	0.3	$	(0.4)	$	1.6


	December 31, 2021
	Level 1		Level 2		Level 3		Other		Total
Assets:	(in millions)

Risk Management Assets
Risk Management Commodity Contracts (c) (g)	$	—	$	0.3	$	12.2	$	(0.4)	$	12.1

Liabilities:

Risk Management Liabilities
Risk Management Commodity Contracts (c) (g)	$	—	$	3.7	$	0.1	$	(0.1)	$	3.7

SWEPCo


	December 31, 2022
	Level 1		Level 2		Level 3		Other		Total
Assets:	(in millions)



Risk Management Assets
Risk Management Commodity Contracts (c) (g)	$	—	$	2.2	$	14.6	$	(0.4)	$	16.4



Liabilities:

Risk Management Liabilities
Risk Management Commodity Contracts (c) (g)	$	—	$	1.6	$	0.4	$	(0.6)	$	1.4


	December 31, 2021
	Level 1		Level 2		Level 3		Other		Total
Assets:	(in millions)



Risk Management Assets
Risk Management Commodity Contracts (c) (g)	$	—	$	0.3	$	11.0	$	(0.4)	$	10.9



Liabilities:

Risk Management Liabilities
Risk Management Commodity Contracts (c) (g)	$	—	$	2.1	$	0.1	$	(0.1)	$	2.1

(a)Amounts in “Other” column primarily represent cash deposits in bank accounts with financial institutions or third-parties. Level 1 and Level 2 amounts primarily represent investments in money market funds.

(b)Amounts represent publicly-traded equity securities and equity-based mutual funds.

(c)Amounts in “Other” column primarily represent counterparty netting of risk management and hedging contracts and associated cash collateral under the accounting guidance for “Derivatives and Hedging.”

(d)The December 31, 2022 maturities of the net fair value of risk management contracts prior to cash collateral, assets/(liabilities), were as follows: Level 1 matures $(7) million in 2023; Level 2 matures $182 million in 2023, $134 million in periods 2024-2026, $10 million in periods 2027-2028 and $1 million in periods 2029-2033; Level 3 matures $128 million in 2023, $6 million in periods 2024-2026, $6 million in periods 2027-2028 and $(5) million in periods 2029-2033. Risk management commodity contracts are substantially comprised of power contracts.

(e)Amounts in “Other” column primarily represent accrued interest receivables from financial institutions. Level 1 amounts primarily represent investments in money market funds.

(f)The December 31, 2021 maturities of the net fair value of risk management contracts prior to cash collateral, assets/(liabilities), were as follows: Level 1 matures $1 million in 2022 and $1 million in periods 2023-2025; Level 2 matures $42 million in 2022, $109 million in periods 2023-2025; $10 million in periods 2026-2027 and $3 million in periods 2028-2033; Level 3 matures $82 million in 2022, $10 million in periods 2023-2025, $9 million in periods 2026-2027 and $(17) million in periods 2028-2033. Risk management commodity contracts are substantially comprised of power contracts.

(g)Substantially comprised of power contracts for the Registrant Subsidiaries.

(h)See “Warrants Held in Investee” section of Note 10 in the 2021 Annual Report for additional information.

(i)Amounts exclude Risk Management Assets of $8.5 million and $6 million as of December 31, 2022 and 2021, respectively, classified as Assets Held for Sale on the balance sheets. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

(j)Amounts exclude Risk Management Liabilities of $0 million and $0.1 million as of December 31, 2022 and 2021, respectively, classified as Liabilities Held for Sale on the balance sheets. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

The following tables set forth a reconciliation of changes in the fair value of net trading derivatives classified as Level 3 in the fair value hierarchy:


Year Ended December 31, 2022	AEP		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Balance as of December 31, 2021	$	97.3	$	41.7	$	(0.7)	$	(92.5)	$	12.1	$	10.9
Realized Gain (Loss) Included in Net Income (or Changes in Net Assets) (a) (b)	69.5		3.0		3.7		6.5		24.2		35.8
Unrealized Gain (Loss) Included in Net Income (or Changes in Net Assets) Relating to Assets Still Held at the Reporting Date (a)	(34.9)		—		—		—		—		—
Realized and Unrealized Gains (Losses) Included in Other Comprehensive Income (c)	9.6		—		—		—		—		—
Settlements	(154.6)		(44.7)		(3.0)		0.3		(36.3)		(45.0)
Transfers into Level 3 (d) (e)	1.7		—		—		—		—		—
Transfers out of Level 3 (e)	0.1		—		—		—		—		6.9
Changes in Fair Value Allocated to Regulated Jurisdictions (f)	165.9		69.1		4.6		45.7		23.7		5.6
Assets and Liabilities Held for Sale related to KPCo (g)	(2.7)		—		—		—		—		—
Balance as of December 31, 2022	$	151.9	$	69.1	$	4.6	$	(40.0)	$	23.7	$	14.2


Year Ended December 31, 2021	AEP		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Balance as of December 31, 2020	$	113.3	$	19.3	$	2.1	$	(110.3)	$	10.3	$	1.6
Realized Gain (Loss) Included in Net Income (or Changes in Net Assets) (a) (b)	48.6		8.3		(0.1)		2.4		16.1		9.5
Unrealized Gain (Loss) Included in Net Income (or Changes in Net Assets) Relating to Assets Still Held at the Reporting Date (a)	(45.2)		—		—		—		—		—
Realized and Unrealized Gains (Losses) Included in Other Comprehensive Income (c)	24.2		—		—		—		—		—
Settlements	(89.0)		(28.0)		(2.2)		6.3		(26.4)		(15.5)
Transfers into Level 3 (d) (e)	(3.8)		—		—		—		—		—
Transfers out of Level 3 (e)	(34.4)		—		—		—		—		—
Changes in Fair Value Allocated to Regulated Jurisdictions (f)	89.4		42.1		(0.5)		9.1		12.1		15.3
Assets and Liabilities Held for Sale related to KPCo (g)	(5.8)		—		—		—		—		—
Balance as of December 31, 2021	$	97.3	$	41.7	$	(0.7)	$	(92.5)	$	12.1	$	10.9


Year Ended December 31, 2020	AEP		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Balance as of December 31, 2019	$	109.9	$	37.7	$	5.8	$	(103.6)	$	15.8	$	1.4
Realized Gain (Loss) Included in Net Income (or Changes in Net Assets) (a) (b)	39.5		13.2		2.5		(1.6)		11.9		2.8
Unrealized Gain (Loss) Included in Net Income (or Changes in Net Assets) Relating to Assets Still Held at the Reporting Date (a)	35.3		—		—		—		—		—
Realized and Unrealized Gains (Losses) Included in Other Comprehensive Income (c)	13.8		—		—		—		—		—
Settlements	(113.1)		(51.6)		(8.6)		8.9		(27.6)		(6.6)
Transfers into Level 3 (d) (e)	(3.8)		—		—		—		—		—
Transfers out of Level 3 (e)	5.6		0.7		0.4		—		—		—
Changes in Fair Value Allocated to Regulated Jurisdictions (f)	26.1		19.3		2.0		(14.0)		10.2		4.0
Balance as of December 31, 2020	$	113.3	$	19.3	$	2.1	$	(110.3)	$	10.3	$	1.6

(a)Included in revenues on the statements of income.

(b)Represents the change in fair value between the beginning of the reporting period and the settlement of the risk management commodity contract.

(c)Included in cash flow hedges on the statements of comprehensive income.

(d)Represents existing assets or liabilities that were previously categorized as Level 2.

(e)Transfers are recognized based on their value at the beginning of the reporting period that the transfer occurred.

(f)Relates to the net gains (losses) of those contracts that are not reflected on the statements of income. These changes in fair value are recorded as regulatory liabilities for net gains and as regulatory assets for net losses or accounts payable.

(g)Amounts represents Risk Management Assets classified as Assets Held for Sale on the balance sheets. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

The following tables quantify the significant unobservable inputs used in developing the fair value of Level 3 positions:

AEP


December 31, 2022
						Significant	Input/Range
	Fair Value				Valuation	Unobservable					Weighted
	Assets		Liabilities		Technique	Input	Low		High		Average (c)
	(in millions)
Energy Contracts	$	204.0	$	167.4	Discounted Cash Flow	Forward Market Price (a)	$	2.91	$	187.34	$	49.14

FTRs (d) (e)	128.5		13.2		Discounted Cash Flow	Forward Market Price (a)	(36.45)		20.72		1.18

Total	$	332.5	$	180.6


December 31, 2021
						Significant	Input/Range
	Fair Value				Valuation	Unobservable					Weighted
	Assets		Liabilities		Technique	Input	Low		High		Average (c)
	(in millions)
Energy Contracts (f)	$	164.4	$	135.2	Discounted Cash Flow	Forward Market Price (a)	$	10.30	$	76.70	$	37.11
Natural Gas Contracts	3.6		—		Discounted Cash Flow	Forward Market Price (b)	3.11		4.02		3.47
FTRs (d) (e)	77.5		13.0		Discounted Cash Flow	Forward Market Price (a)	(23.93)		26.38		0.86

Total	$	245.5	$	148.2

APCo

December 31, 2022

Significant

Input/Range

Fair Value

Valuation

Unobservable

Weighted

Assets

Liabilities

Technique

Input (a)

Low

High

Average (c)

(in millions)

FTRs

69.4

0.3

Discounted Cash Flow

Forward Market Price

(2.82)

18.88

3.89


December 31, 2021
						Significant	Input/Range
	Fair Value				Valuation	Unobservable					Weighted
	Assets		Liabilities		Technique	Input (a)	Low		High		Average (c)
	(in millions)
Energy Contracts	$	—	$	0.3	Discounted Cash Flow	Forward Market Price	$	32.20	$	56.54	$	44.77
FTRs	42.0		—		Discounted Cash Flow	Forward Market Price	(0.30)		26.38		2.63
Total	$	42.0	$	0.3

I&M

December 31, 2022

Significant

Input/Range

Fair Value

Valuation

Unobservable

Weighted

Assets

Liabilities

Technique

Input (a)

Low

High

Average (c)

(in millions)

FTRs

5.3

0.7

Discounted Cash Flow

Forward Market Price

0.16

18.79

1.23


December 31, 2021
						Significant	Input/Range
	Fair Value				Valuation	Unobservable					Weighted
	Assets		Liabilities		Technique	Input (a)	Low		High		Average (c)
	(in millions)
Energy Contracts	$	—	$	0.2	Discounted Cash Flow	Forward Market Price	$	32.20	$	56.54	$	44.77
FTRs	7.6		8.1		Discounted Cash Flow	Forward Market Price	(5.45)		17.78		(0.12)
Total	$	7.6	$	8.3

OPCo

December 31, 2022

Significant

Input/Range

Fair Value

Valuation

Unobservable

Weighted

Assets

Liabilities

Technique

Input (a)

Low

High

Average (c)

(in millions)

Energy Contracts

—

40.0

Discounted Cash Flow

Forward Market Price

2.91

187.34

48.76

December 31, 2021

Significant

Input/Range

Fair Value

Valuation

Unobservable

Weighted

Assets

Liabilities

Technique

Input (a)

Low

High

Average (c)

(in millions)

Energy Contracts

—

92.5

Discounted Cash Flow

Forward Market Price

14.26

52.98

30.68

PSO

December 31, 2022

Significant

Input/Range

Fair Value

Valuation

Unobservable

Weighted

Assets

Liabilities

Technique

Input (a)

Low

High

Average (c)

(in millions)

FTRs

24.0

0.3

Discounted Cash Flow

Forward Market Price

(36.45)

3.40

(7.55)

December 31, 2021

Significant

Input/Range

Fair Value

Valuation

Unobservable

Weighted

Assets

Liabilities

Technique

Input (a)

Low

High

Average (c)

(in millions)

FTRs

12.2

0.1

Discounted Cash Flow

Forward Market Price

(18.39)

1.87

(2.57)

SWEPCo

December 31, 2022

Significant

Input/Range

Fair Value

Valuation

Unobservable

Weighted

Assets

Liabilities

Technique

Input (a)

Low

High

Average (c)

(in millions)

FTRs

14.6

0.4

Discounted Cash Flow

Forward Market Price

(36.45)

3.40

(7.55)


December 31, 2021
						Significant	Input/Range
	Fair Value				Valuation	Unobservable					Weighted
	Assets		Liabilities		Technique	Input	Low		High		Average (c)
	(in millions)
Natural Gas Contracts	$	3.6	$	—	Discounted Cash Flow	Forward Market Price (b)	$	3.11	$	4.02	$	3.47
FTRs	7.4		0.1		Discounted Cash Flow	Forward Market Price (a)	(18.39)		1.87		(2.57)
Total	$	11.0	$	0.1

(a)Represents market prices in dollars per MWh.

(b)Represents market prices in dollars per MMBtu.

(c)The weighted-average is the product of the forward market price of the underlying commodity and volume weighted by term.

(d)Amounts exclude Risk Management Assets as of December 31, 2022 and 2021 of $8.6 million and $6 million, respectively, classified as Assets Held for Sale on the balance sheets. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

(e)Amounts exclude Risk Management Liabilities as of December 31, 2022 and 2021 of $0.1 million and $0.5 million, respectively, classified as Liabilities Held for Sale on the balance sheets. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

(f)Amount excludes Risk Management Liabilities of $0.1 million classified as Liabilities Held for Sale on the balance sheets. See “Disposition of KPCo and KTCo” section of Note 7 for additional information.

The following table provides the measurement uncertainty of fair value measurements to increases (decreases) in significant unobservable inputs related to Energy Contracts, Natural Gas Contracts, FTRs and Other Investments for the Registrants as of December 31, 2022 and 2021:

Uncertainty of Fair Value Measurements

Significant Unobservable Input

Position

Change in Input

Impact on Fair Value
Measurement

Forward Market Price

Buy

Increase (Decrease)

Higher (Lower)

Forward Market Price

Sell

Increase (Decrease)

Lower (Higher)

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details