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LEASES

12 Months Ended

Dec. 31, 2025

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

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 ratemaking treatment for regulated operations. 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, 2025	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Operating Lease Cost	$	137	$	18	$	1	$	20	$	20	$	17	$	14	$	20
Finance Lease Cost:
Amortization of Right-of-Use Assets	51		8		—		9		6		4		3		4
Interest on Lease Liabilities	10		2		—		1		2		1		1		1
Total Lease Rental Costs (a)	$	198	$	28	$	1	$	30	$	28	$	22	$	18	$	25


Year Ended December 31, 2024	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Operating Lease Cost	$	146	$	32	$	1	$	18	$	20	$	17	$	14	$	18
Finance Lease Cost:
Amortization of Right-of-Use Assets	64		8		—		9		7		5		3		13
Interest on Lease Liabilities	12		1		—		2		2		1		1		1
Total Lease Rental Costs (a)	$	222	$	41	$	1	$	29	$	29	$	23	$	18	$	32


Year Ended December 31, 2023	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Operating Lease Cost	$	150	$	34	$	1	$	19	$	20	$	17	$	14	$	18
Finance Lease Cost:
Amortization of Right-of-Use Assets	69		8		—		8		7		5		3		20
Interest on Lease Liabilities	12		1		—		2		2		1		1		1
Total Lease Rental Costs (a)	$	231	$	43	$	1	$	29	$	29	$	23	$	18	$	39

(a)Excludes variable and short-term lease costs, which were immaterial.

Supplemental information related to leases are shown in the tables below:


December 31, 2025	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
Weighted-Average Remaining Lease Term (years):
Operating Leases	17.33		4.33		3.29		13.03		3.73		4.04		25.59		29.02
Finance Leases	4.53		4.80		0.00		4.42		5.12		4.24		4.61		5.60
Weighted-Average Discount Rate:
Operating Leases	4.74	%	4.57	%	4.51	%	5.08	%	4.61	%	4.36	%	4.48	%	4.96	%
Finance Leases	6.36	%	5.99	%	—	%	5.73	%	9.04	%	5.74	%	5.71	%	5.90	%


December 31, 2024	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
Weighted-Average Remaining Lease Term (years):
Operating Leases	12.80		4.45		2.29		5.39		4.43		4.64		23.68		21.97
Finance Leases	4.81		5.04		0.00		4.09		4.83		4.58		5.44		6.14
Weighted-Average Discount Rate:
Operating Leases	3.89	%	4.29	%	4.55	%	4.20	%	4.11	%	4.17	%	3.76	%	3.60	%
Finance Leases	6.43	%	5.73	%	—	%	6.69	%	9.07	%	5.59	%	5.48	%	5.73	%


Year Ended December 31, 2025	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	$	135	$	18	$	1	$	20	$	20	$	17	$	13	$	20
Operating Cash Flows Used for Finance Leases	10		1		—		1		2		1		1		1
Financing Cash Flows Used for Finance Leases	51		8		—		9		6		4		3		4

Non-cash Acquisitions Under Operating Leases	$	190	$	12	$	1	$	44	$	17	$	4	$	28	$	70


Year Ended December 31, 2024	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	$	144	$	32	$	1	$	18	$	20	$	17	$	13	$	17
Operating Cash Flows Used for Finance Leases	12		1		—		2		2		1		1		2
Financing Cash Flows Used for Finance Leases	65		8		—		9		7		5		3		14

Non-cash Acquisitions Under Operating Leases	$	82	$	6	$	1	$	9	$	15	$	5	$	3	$	27

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, 2025	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Property, Plant and Equipment Under Finance Leases:
Generation	$	48	$	—	$	—	$	40	$	5	$	—	$	1	$	2
Other Property, Plant and Equipment	291		53		—		19		38		28		23		29
Total Property, Plant and Equipment	339		53		—		59		43		28		24		31
Accumulated Amortization	184		29		—		44		25		15		13		14
Net Property, Plant and Equipment Under Finance Leases	$	155	$	24	$	—	$	15	$	18	$	13	$	11	$	17

Obligations Under Finance Leases:
Noncurrent Liability	$	112	$	17	$	—	$	10	$	13	$	8	$	8	$	13
Liability Due Within One Year	43		7		—		4		4		4		3		4
Total Obligations Under Finance Leases	$	155	$	24	$	—	$	14	$	17	$	12	$	11	$	17


December 31, 2024	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Property, Plant and Equipment Under Finance Leases:
Generation	$	74	$	—	$	—	$	42	$	17	$	—	$	1	$	2
Other Property, Plant and Equipment	284		53		—		19		38		30		23		30
Total Property, Plant and Equipment	358		53		—		61		55		30		24		32
Accumulated Amortization	194		28		—		42		33		16		12		13
Net Property, Plant and Equipment Under Finance Leases	$	164	$	25	$	—	$	19	$	22	$	14	$	12	$	19

Obligations Under Finance Leases:
Noncurrent Liability	$	117	$	18	$	—	$	11	$	16	$	10	$	9	$	15
Liability Due Within One Year	47		7		—		8		6		4		3		4
Total Obligations Under Finance Leases	$	164	$	25	$	—	$	19	$	22	$	14	$	12	$	19


December 31, 2025	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Operating Lease Assets	$	661	$	52	$	3	$	95	$	52	$	50	$	126	$	198

Obligations Under Operating Leases:
Noncurrent Liability	$	578	$	40	$	2	$	81	$	37	$	37	$	122	$	195
Liability Due Within One Year	100		14		1		15		17		13		11		7
Total Obligations Under Operating Leases	$	678	$	54	$	3	$	96	$	54	$	50	$	133	$	202


December 31, 2024	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
Operating Lease Assets	$	580	$	54	$	2	$	67	$	52	$	60	$	106	$	141

Obligations Under Operating Leases:
Noncurrent Liability	$	504	$	43	$	1	$	54	$	40	$	48	$	102	$	138
Liability Due Within One Year	92		13		1		14		12		12		10		8
Total Obligations Under Operating Leases	$	596	$	56	$	2	$	68	$	52	$	60	$	112	$	146

Future minimum lease payments consisted of the following as of December 31, 2025:


Finance Leases	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
2026	$	52	$	8	$	—	$	5	$	5	$	4	$	4	$	5
2027	41		6		—		3		5		3		3		4
2028	30		4		—		2		4		2		2		3
2029	21		3		—		2		3		1		1		3
2030	15		2		—		1		2		1		1		2
After 2030	21		5		—		2		3		1		2		4
Total Future Minimum Lease Payments	180		28		—		15		22		12		13		21
Less: Imputed Interest	25		4		—		1		5		—		2		4
Estimated Present Value of Future Minimum Lease Payments	$	155	$	24	$	—	$	14	$	17	$	12	$	11	$	17


Operating Leases	AEP		AEP Texas		AEPTCo		APCo		I&M		OPCo		PSO		SWEPCo
	(in millions)
2026	$	133	$	17	$	1	$	20	$	19	$	16	$	13	$	21
2027	114		14		1		19		15		14		12		19
2028	99		11		1		16		13		12		11		17
2029	71		7		—		12		8		7		9		14
2030	47		5		—		8		2		3		7		12
After 2030	607		7		—		68		2		3		178		339
Total Future Minimum Lease Payments	1,071		61		3		143		59		55		230		422
Less: Imputed Interest	393		7		—		47		5		5		97		220
Estimated Present Value of Future Minimum Lease Payments	$	678	$	54	$	3	$	96	$	54	$	50	$	133	$	202

Master Lease Agreements (Applies to all Registrants except AEPTCo)

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, 2025, 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:


Company	Maximum Potential Loss
	(in millions)
AEP	$	38
AEP Texas	9
APCo	5
I&M	4
OPCo	6
PSO	4
SWEPCo	4

Lessor Activity

The Registrants’ lessor activity was immaterial as of and for the years ended December 31, 2025 and December 31, 2024, respectively.

LEASES