Variable Interest Entities

3 Months Ended

Mar. 31, 2024

VARIABLE INTEREST ENTITIES

The disclosures in this note apply to AEP unless indicated otherwise.

The accounting guidance for “Variable Interest Entities” is a consolidation model that considers if a company has a variable interest in a VIE. A VIE is a legal entity that possesses any of the following conditions: the entity’s equity at risk is not sufficient to permit the legal entity to finance its activities without additional subordinated financial support, equity owners are unable to direct the activities that most significantly impact the legal entity’s economic performance (or they possess disproportionate voting rights in relation to the economic interest in the legal entity), or the equity owners lack the obligation to absorb the legal entity’s expected losses or the right to receive the legal entity’s expected residual returns. Entities are required to consolidate a VIE when it is determined that they have a controlling financial interest in a VIE and therefore, are the primary beneficiary of that VIE, as defined by the accounting guidance for “Variable Interest Entities.” In determining whether AEP is the primary beneficiary of a VIE, management considers whether AEP has the power to direct the most significant activities of the VIE and is obligated to absorb losses or receive the expected residual returns that are significant to the VIE. Management believes that significant assumptions and judgments were applied consistently.

AEP holds ownership interests in businesses with varying ownership structures. Partnership interests and other variable interests are evaluated to determine if each entity is a VIE, and if so, whether or not the VIE should be consolidated into AEP’s financial statements. AEP has not provided material financial or other support that was not previously contractually required to any of its consolidated VIEs. If an entity is determined not to be a VIE, or if the entity is determined to be a VIE and AEP is not deemed to be the primary beneficiary, the entity is accounted for under the equity method of accounting.

Consolidated Variable Interests Entities

The Annual Report on Form 10-K for the year ended December 31, 2023 includes a detailed discussion of the Registrants’ consolidated VIEs.

The balances below represent the assets and liabilities of consolidated VIEs. These balances include intercompany transactions that are eliminated upon consolidation.




March 31, 2024

	Consolidated VIEs
	SWEPCo Sabine		I&M DCC Fuel		AEP Texas Transition Funding			AEP Texas Restoration Funding			APCo Appalachian Consumer Rate Relief Funding			AEP Credit		Protected Cell of EIS		Transource Energy
	(in millions)
ASSETS
Current Assets	$	5.1	$	75.3	$	40.1		$	20.4		$	6.3		$	1,165.3	$	211.6	$	31.7
Net Property, Plant and Equipment	—		129.5		—			—			—			—		—		536.9
Other Noncurrent Assets	140.1		63.5		55.3		(a)	139.7		(b)	130.3		(c)	10.2		—		9.3
Total Assets	$	145.2	$	268.3	$	95.4		$	160.1		$	136.6		$	1,175.5	$	211.6	$	577.9

LIABILITIES AND EQUITY
Current Liabilities	$	22.8	$	75.1	$	76.3		$	36.4		$	29.0		$	1,113.7	$	52.3	$	22.5
Noncurrent Liabilities	122.1		193.2		14.7			122.4			105.7			1.0		90.8		258.8
Equity	0.3		—		4.4			1.3			1.9			60.8		68.5		296.6
Total Liabilities and Equity	$	145.2	$	268.3	$	95.4		$	160.1		$	136.6		$	1,175.5	$	211.6	$	577.9

(a)Includes an intercompany item eliminated in consolidation of $6 million.

(b)Includes an intercompany item eliminated in consolidation of $6 million.

(c)Includes an intercompany item eliminated in consolidation of $2 million.




December 31, 2023

	Consolidated VIEs
	SWEPCo Sabine		I&M DCC Fuel		AEP Texas Transition Funding			AEP Texas Restoration Funding			APCo Appalachian Consumer Rate Relief Funding			AEP Credit		Protected Cell of EIS		Transource Energy
	(in millions)
ASSETS
Current Assets	$	4.2	$	81.9	$	25.5		$	27.5		$	13.3		$	1,208.8	$	205.3	$	36.9
Net Property, Plant and Equipment	—		153.8		—			—			—			—		—		533.4
Other Noncurrent Assets	150.7		81.7		71.4		(a)	145.6		(b)	138.2		(c)	9.6		—		5.1
Total Assets	$	154.9	$	317.4	$	96.9		$	173.1		$	151.5		$	1,218.4	$	205.3	$	575.4

LIABILITIES AND EQUITY
Current Liabilities	$	19.9	$	81.7	$	75.5		$	36.8		$	29.9		$	1,155.0	$	49.2	$	45.3
Noncurrent Liabilities	134.8		235.7		17.0			135.1			119.7			0.9		91.7		241.5
Equity	0.2		—		4.4			1.2			1.9			62.5		64.4		288.6
Total Liabilities and Equity	$	154.9	$	317.4	$	96.9		$	173.1		$	151.5		$	1,218.4	$	205.3	$	575.4

(a)Includes an intercompany item eliminated in consolidation of $8 million.

(b)Includes an intercompany item eliminated in consolidation of $6 million.

(c)Includes an intercompany item eliminated in consolidation of $2 million.

Significant Variable Interests in Non-Consolidated VIEs and Significant Equity Method Investments

The Annual Report on Form 10-K for the year ended December 31, 2023 includes a detailed discussion of significant variable interests in non-consolidated VIEs and other significant equity method investments. As of December 31, 2023, AEP no longer owns interests in four joint ventures due to the sale of the Competitive Contracted Renewables Portfolio. Previously held by AEP Wind Holdings, LLC, the interests were accounted for under the equity method. See the “Disposition of the Competitive Contracted Renewables Portfolio” section of Note 6 for additional information.