The Registrants lease property, plant and equipment including, but not limited to, fleet, information technology and real estate leases. These leases require payments of non-lease components, including related property taxes, operating and maintenance costs. AEP does not separate non-lease components from associated lease components. Many of these leases have purchase or renewal options. Leases not renewed are often replaced by other leases. Options to renew or purchase a lease are included in the measurement of lease assets and liabilities if it is reasonably certain the Registrant will exercise the option.

Lease obligations are measured using the discount rate implicit in the lease when that rate is readily determinable. AEP has visibility into the rate implicit in the lease when assets are leased from selected financial institutions under master leasing agreements. When the implicit rate is not readily determinable, the Registrants measure their lease obligation using their estimated secured incremental borrowing rate. Incremental borrowing rates are comprised of an underlying risk-free rate and a secured credit spread relative to the lessee on a matched maturity basis.

Operating lease rentals and finance lease amortization costs are generally charged to Other Operation and Maintenance expense in accordance with rate-making treatment for regulated operations. The amortization costs related to the Rockport finance lease were charged to Depreciation and Amortization. Interest on finance lease liabilities is generally charged to Interest Expense. Lease costs associated with capital projects are included in Property, Plant and Equipment on the balance sheets. For regulated operations with finance leases, a finance lease asset and offsetting liability are recorded at the present value of the remaining lease payments for each reporting period. Finance leases for nonregulated property are accounted for as if the assets were owned and financed. The components of rental costs were as follows:


Year Ended December 31, 2023	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Operating Lease Cost	$	149.9	$	34.0	$	1.3	$	18.5	$	19.6	$	17.3	$	13.5	$	17.5
Finance Lease Cost:
Amortization of Right-of-Use Assets	69.1		7.4		—		8.3		7.3		5.0		3.3		19.9
Interest on Lease Liabilities	11.9		1.4		—		1.8		2.5		0.9		0.7		1.4
Total Lease Rental Costs (a)	$	230.9	$	42.8	$	1.3	$	28.6	$	29.4	$	23.2	$	17.5	$	38.8


Year Ended December 31, 2022	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Operating Lease Cost	$	157.5	$	18.4	$	1.1	$	17.9	$	29.5	$	16.9	$	11.8	$	15.3
Finance Lease Cost:
Amortization of Right-of-Use Assets	205.5		6.8		—		7.9		78.7		4.9		3.2		10.8
Interest on Lease Liabilities	13.4		1.3		—		2.0		3.1		0.8		0.6		2.1
Total Lease Rental Costs (a)	$	376.4	$	26.5	$	1.1	$	27.8	$	111.3	$	22.6	$	15.6	$	28.2


Year Ended December 31, 2021	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Operating Lease Cost	$	275.3	$	18.4	$	1.7	$	19.3	$	90.2	$	19.0	$	8.7	$	12.1
Finance Lease Cost:
Amortization of Right-of-Use Assets	74.7		6.7		—		7.7		12.9		4.9		3.2		11.0
Interest on Lease Liabilities	14.4		1.4		—		2.4		3.0		0.8		0.6		2.5
Total Lease Rental Costs (a)	$	364.4	$	26.5	$	1.7	$	29.4	$	106.1	$	24.7	$	12.5	$	25.6


December 31, 2023	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
Weighted-Average Remaining Lease Term (years):
Operating Leases	12.58		3.99		2.76		6.01		4.53		5.36		23.85		22.50
Finance Leases	4.63		5.13		0.00		4.16		4.95		4.97		5.76		4.78
Weighted-Average Discount Rate:
Operating Leases	3.73	%	4.23	%	3.61	%	3.50	%	3.89	%	3.93	%	3.72	%	3.53	%
Finance Leases	6.19	%	5.27	%	—	%	7.04	%	8.62	%	5.32	%	5.14	%	5.22	%


December 31, 2022	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
Weighted-Average Remaining Lease Term (years):
Operating Leases	12.69		4.33		2.05		5.29		5.79		5.98		23.90		23.55
Finance Leases	4.61		5.39		0.00		4.25		4.76		5.27		6.02		4.13
Weighted-Average Discount Rate:
Operating Leases	3.54	%	4.15	%	1.96	%	3.61	%	3.62	%	3.73	%	3.43	%	3.41	%
Finance Leases	5.76	%	4.75	%	—	%	7.09	%	8.99	%	4.53	%	4.63	%	4.80	%


Year Ended December 31, 2023	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating Cash Flows Used for Operating Leases	$	146.8	$	33.6	$	1.3	$	18.3	$	19.5	$	17.0	$	12.5	$	16.5
Operating Cash Flows Used for Finance Leases	11.9		1.4		—		1.8		2.5		0.9		0.7		1.4
Financing Cash Flows Used for Finance Leases	68.3		7.4		—		8.3		7.4		5.0		3.3		19.1

Non-cash Acquisitions Under Operating Leases	$	99.8	$	12.4	$	1.2	$	15.7	$	7.9	$	10.2	$	15.5	$	14.3


Year Ended December 31, 2022	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Cash paid for amounts included in the measurement of lease liabilities:
Operating Cash Flows Used for Operating Leases	$	155.1	$	18.3	$	1.0	$	17.9	$	29.7	$	17.5	$	10.5	$	13.7
Operating Cash Flows Used for Finance Leases	13.6		1.3		—		2.0		3.2		0.8		0.6		2.1
Financing Cash Flows Used for Finance Leases	309.5		6.8		—		7.9		130.7		4.9		3.2		10.8

Non-cash Acquisitions Under Operating Leases	$	191.4	$	36.7	$	1.7	$	23.1	$	19.1	$	8.4	$	46.0	$	53.6

The following tables show property, plant and equipment under finance leases and noncurrent assets under operating leases and related obligations recorded on the balance sheets. Unless shown as a separate line on the balance sheets due to materiality, net operating lease assets are included in Deferred Charges and Other Noncurrent Assets, current finance lease obligations are included in Other Current Liabilities and long-term finance lease obligations are included in Deferred Credits and Other Noncurrent Liabilities on the balance sheets. Lease obligations are not recognized on the balance sheets for lease agreements with a lease term of less than twelve months.


December 31, 2023	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Property, Plant and Equipment Under Finance Leases:
Generation	$	120.1	$	—	$	—	$	41.0	$	28.2	$	—	$	0.6	$	25.3
Other Property, Plant and Equipment	305.9		53.9		—		22.1		42.3		33.7		25.5		32.0
Total Property, Plant and Equipment	426.0		53.9		—		63.1		70.5		33.7		26.1		57.3
Accumulated Amortization	221.5		26.3		—		37.1		39.0		15.5		12.3		28.3
Net Property, Plant and Equipment Under Finance Leases	$	204.5	$	27.6	$	—	$	26.0	$	31.5	$	18.2	$	13.8	$	29.0

Obligations Under Finance Leases:
Noncurrent Liability	$	139.9	$	20.6	$	—	$	17.8	$	20.8	$	13.2	$	10.7	$	18.8
Liability Due Within One Year	65.7		7.0		—		8.2		10.7		5.0		3.1		11.3
Total Obligations Under Finance Leases	$	205.6	$	27.6	$	—	$	26.0	$	31.5	$	18.2	$	13.8	$	30.1


December 31, 2022	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Property, Plant and Equipment Under Finance Leases:
Generation	$	120.9	$	—	$	—	$	41.1	$	28.0	$	—	$	0.6	$	25.9
Other Property, Plant and Equipment	321.4		53.7		—		20.1		40.6		32.7		25.2		58.3
Total Property, Plant and Equipment	442.3		53.7		—		61.2		68.6		32.7		25.8		84.2
Accumulated Amortization	229.6		23.6		—		31.9		34.8		13.8		10.8		54.6
Net Property, Plant and Equipment Under Finance Leases	$	212.7	$	30.1	$	—	$	29.3	$	33.8	$	18.9	$	15.0	$	29.6

Obligations Under Finance Leases:
Noncurrent Liability	$	168.4	$	23.1	$	—	$	21.6	$	27.1	$	14.2	$	11.7	$	31.3
Liability Due Within One Year	57.3		7.0		—		7.7		6.9		4.7		3.3		10.9
Total Obligations Under Finance Leases	$	225.7	$	30.1	$	—	$	29.3	$	34.0	$	18.9	$	15.0	$	42.2


December 31, 2023	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Operating Lease Assets	$	620.2	$	77.6	$	2.6	$	73.7	$	53.8	$	69.9	$	112.8	$	126.3

Obligations Under Operating Leases:
Noncurrent Liability	$	519.4	$	50.9	$	1.4	$	59.8	$	37.7	$	56.7	$	106.8	$	122.5
Liability Due Within One Year	115.7		28.7		1.3		14.6		16.8		13.5		10.1		9.0
Total Obligations Under Operating Leases	$	635.1	$	79.6	$	2.7	$	74.4	$	54.5	$	70.2	$	116.9	$	131.5


December 31, 2022	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Operating Lease Assets	$	645.5	$	94.7	$	2.7	$	73.6	$	64.3	$	73.8	$	106.1	$	123.4

Obligations Under Operating Leases:
Noncurrent Liability	$	552.5	$	67.8	$	1.5	$	59.1	$	48.9	$	60.3	$	99.3	$	120.2
Liability Due Within One Year	113.6		28.6		1.3		15.0		16.0		13.5		8.9		8.4
Total Obligations Under Operating Leases	$	666.1	$	96.4	$	2.8	$	74.1	$	64.9	$	73.8	$	108.2	$	128.6


Finance Leases	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
2024	$	76.8	$	8.3	$	—	$	9.9	$	12.8	$	5.8	$	3.7	$	12.6
2025	48.6		6.6		—		8.5		7.2		4.3		2.9		4.6
2026	33.0		5.1		—		3.5		4.5		3.1		2.5		3.9
2027	26.2		4.0		—		2.3		4.0		2.5		2.0		3.5
2028	19.2		2.8		—		1.9		3.3		2.0		1.7		3.0
After 2028	35.4		5.1		—		3.4		7.3		3.2		3.3		7.2
Total Future Minimum Lease Payments	239.2		31.9		—		29.5		39.1		20.9		16.1		34.8
Less: Imputed Interest	33.6		4.3		—		3.5		7.6		2.7		2.3		4.7
Estimated Present Value of Future Minimum Lease Payments	$	205.6	$	27.6	$	—	$	26.0	$	31.5	$	18.2	$	13.8	$	30.1


Operating Leases	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
2024	$	141.6	$	32.1	$	1.4	$	17.8	$	18.9	$	16.9	$	12.2	$	16.2
2025	103.3		15.7		0.7		14.8		10.6		15.3		11.1		15.0
2026	92.0		13.3		0.4		13.3		9.7		14.1		10.3		12.9
2027	82.6		10.7		0.2		12.1		8.9		12.8		9.3		11.5
2028	67.4		7.8		0.1		10.0		7.0		10.6		7.9		9.5
After 2028	327.6		8.1		—		16.8		4.8		9.1		129.1		135.6
Total Future Minimum Lease Payments	814.5		87.7		2.8		84.8		59.9		78.8		179.9		200.7
Less: Imputed Interest	179.4		8.1		0.1		10.4		5.4		8.6		63.0		69.2
Estimated Present Value of Future Minimum Lease Payments	$	635.1	$	79.6	$	2.7	$	74.4	$	54.5	$	70.2	$	116.9	$	131.5

The Registrants lease certain equipment under master lease agreements. Under the lease agreements, the lessor is guaranteed a residual value up to a stated percentage of the equipment cost at the end of the lease term. If the actual fair value of the leased equipment is below the guaranteed residual value at the end of the lease term, the Registrants are committed to pay the difference between the actual fair value and the residual value guarantee. Historically, at the end of the lease term the fair value has been in excess of the amount guaranteed. As of December 31, 2023, the maximum potential loss by the Registrants for these lease agreements assuming the fair value of the equipment is zero at the end of the lease term was as follows: