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. AEP’s interests in nonconsolidated VIEs are accounted for under the equity method of accounting.

Sabine is a mining operator whose purpose was to provide mining services to SWEPCo’s Pirkey Plant until its retirement in March 2023. Sabine’s post-production operations primarily consist of reclamation and other land-related activities. The terms of these services are governed by a lignite mining agreement between SWEPCo and Sabine. SWEPCo has no equity investment in Sabine but is Sabine’s only customer. SWEPCo guarantees the debt obligations and lease obligations of Sabine. Under the terms of the note agreements with Sabine’s creditors, substantially all assets are pledged and all rights under the lignite mining agreement are assigned to SWEPCo. The creditors of Sabine have no recourse to any AEP entity other than SWEPCo. Under the provisions of the lignite mining agreement, SWEPCo is required to pay an amount equal to Sabine’s operating costs plus a management fee and SWEPCo holds an option agreement to purchase Sabine, which SWEPCo exercised in 2023. As a result, SWEPCo will take direct control over reclamation activities in October 2026. Based on these facts, management concluded that SWEPCo is the primary beneficiary and is required to consolidate Sabine. See the tables below for the classification of Sabine’s assets and liabilities on SWEPCo’s balance sheets.

As part of the process to receive a renewal of a Texas Railroad Commission permit for lignite mining, SWEPCo provides guarantees of mine reclamation of $155 million. Since SWEPCo uses self-bonding, the guarantee commits SWEPCo to complete the reclamation, in the event, Sabine does not complete the work. This guarantee ends upon completion of reclamation activities expected by 2037 with an estimated cost of $68 million. Actual costs may vary due to inflation and changes in reclamation scope. SWEPCo recovers these costs through its fuel clauses. As of December 31, 2025, SWEPCo has recorded an ARO of $66 million and has paid or accrued $113 million for reclamation costs billed by Sabine. To date, SWEPCo has collected $102 million from customers for reclamation costs and expects to collect an additional $77 million recorded in Deferred Charges and Other Noncurrent Assets on SWEPCo’s balance sheets.

I&M has nuclear fuel lease agreements with DCC Fuel, which was formed for the purpose of acquiring, owning and leasing nuclear fuel to I&M. DCC Fuel purchased the nuclear fuel from I&M with funds received from the issuance of notes to financial institutions. Each DCC Fuel entity is a single-lessee leasing arrangement with only one asset and is capitalized with all debt. Each is a separate legal entity from I&M, the assets of which are not available to satisfy the debts of I&M. Payments on the leases for the years ended December 31, 2025, 2024 and 2023 were $119 million, $111 million and $97 million, respectively. The leases qualify as finance leases because title to the nuclear fuel transfers to I&M at the end of the respective lease terms, which do not exceed 54 months. Based on I&M’s control of DCC Fuel, management concluded that I&M is the primary beneficiary and is required to consolidate DCC Fuel. The finance leases are eliminated upon consolidation. See the tables below for the classification of DCC Fuel’s assets and liabilities on I&M’s balance sheets.

Restoration Funding was formed for the sole purpose of issuing and servicing securitization bonds related to storm restoration of AEP Texas’ distribution system primarily due to damage caused by Hurricane Harvey. Management concluded that AEP Texas is the primary beneficiary of Restoration Funding because AEP Texas has the power to direct the most significant activities of the VIE and AEP Texas’ equity interest could potentially be significant. Therefore, AEP Texas is required to consolidate Restoration Funding. As of December 31, 2025 and 2024, $25 million and $24 million of the securitized bonds were included in Long-term Debt Due Within One Year - Nonaffiliated, respectively, and $78 million and $102 million were included in Long-term Debt - Nonaffiliated, respectively, on the balance sheets. Restoration Funding’s securitized assets were $94 million and $117 million as of December 31, 2025 and 2024, respectively, which are presented separately on the face of the balance sheets.

The securitized restoration assets represent the right to impose and collect Texas storm restoration costs from customers receiving electric transmission or distribution service from AEP Texas under-recovery mechanisms approved by the PUCT. The securitization bonds are payable only from and secured by the securitized assets. The bondholders have no recourse to AEP Texas or any other AEP entity. AEP Texas acts as the servicer for Restoration Funding’s securitized assets and remits all related amounts collected from customers to Restoration Funding for interest and principal payments on the securitization bonds and related costs. See the tables below for the classification of Restoration Funding’s assets and liabilities on the balance sheets.

Appalachian Consumer Rate Relief Funding was formed for the sole purpose of issuing and servicing securitization bonds related to APCo’s under-recovered ENEC deferral balance. Management concluded that APCo is the primary beneficiary of Appalachian Consumer Rate Relief Funding because APCo has the power to direct the most significant activities of the VIE and APCo’s equity interest could potentially be significant. Therefore, APCo is required to consolidate Appalachian Consumer Rate Relief Funding. As of December 31, 2025 and 2024, $30 million and $28 million of the securitized bonds were included in Long-term Debt Due Within One Year - Nonaffiliated, respectively, and $62 million and $91 million were included in Long-term Debt - Nonaffiliated, respectively, on the balance sheets. Appalachian Consumer Rate Relief Funding’s securitized assets were $78 million and $106 million as of December 31, 2025 and 2024, respectively, which are presented separately on the face of the balance sheets.

The phase-in recovery property represents the right to impose and collect West Virginia deferred generation charges from customers receiving electric transmission, distribution and generation service from APCo under a recovery mechanism approved by the WVPSC. In November 2013, securitization bonds were issued. The securitization bonds are payable only from and secured by the securitized assets. The bondholders have no recourse to APCo or any other AEP entity. APCo acts as the servicer for Appalachian Consumer Rate Relief Funding’s securitized assets and remits all related amounts collected from customers to Appalachian Consumer Rate Relief Funding for interest and principal payments on the securitization bonds and related costs. See the tables below for the classification of Appalachian Consumer Rate Relief Funding’s assets and liabilities on APCo’s balance sheets.

Storm Recovery Funding was formed for the sole purpose of issuing and servicing securitization bonds related to storm recovery primarily related to SWEPCo’s distribution system. Management concluded that SWEPCo is the primary beneficiary of Storm Recovery Funding because SWEPCo has the power to direct the most significant activities of the VIE and SWEPCo’s equity interest could potentially be significant. Therefore, SWEPCo is required to consolidate Storm Recovery Funding. As of December 31, 2025 and 2024, $17 million and $23 million of the securitized bonds were included in Long-term Debt Due Within One Year - Nonaffiliated, respectively, and $304 million and $309 million were included in Long-term Debt - Nonaffiliated, respectively, on the balance sheets. Storm Recovery Funding’s securitized assets were $315 million and $331 million as of December 31, 2025 and 2024, respectively, which are presented separately on the face of the balance sheets.

The securitized assets represent the right to impose and collect SWEPCo storm recovery charges from SWEPCo’s Louisiana jurisdictional customers. The securitization bonds are payable only from and secured by the securitized assets. The bondholders have no recourse to SWEPCo or any other AEP entity. SWEPCo acts as the servicer for Storm Recovery Funding’s securitized assets and remits all related amounts collected from customers to Storm Recovery Funding for interest and principal payments on the securitization bonds and related costs. See the tables below for the classification of Storm Recovery Funding’s assets and liabilities on the balance sheets.

In June 2025, Cost Recovery Funding was formed for the sole purpose of issuing and servicing securitization bonds related to plant retirement costs, deferred storm costs related to 2020, 2021, 2022 and 2023 major storms, deferred purchased power expenses, under-recovered purchased power rider costs and issuance-related expenses, including KPSC advisor expenses. Management concluded that KPCo is the primary beneficiary of Cost Recovery Funding because KPCo has the power to direct the most significant activities of the VIE and KPCo’s equity interest could potentially be significant. Therefore, KPCo is required to consolidate Cost Recovery Funding. As of December 31, 2025, $16 million of the securitized bonds was included in Long-term Debt Due Within One Year and $453 million was included in Long-term Debt on the balance sheet. Cost Recovery Funding’s securitized assets were $462 million as of December 31, 2025, which was presented separately on the face of the balance sheet.

The securitized assets represent the right to impose and collect KPCo recovery charges from KPCo’s customers. The securitization bonds are payable only from and secured by the securitized assets. The bondholders have no recourse to KPCo or any other AEP entity. KPCo acts as the servicer for Cost Recovery Funding’s securitized assets and remits all related amounts collected from customers to Cost Recovery Funding for interest and principal payments on the securitization bonds and related costs. See the tables below for the classification of Cost Recovery Funding’s assets and liabilities on the balance sheet.

AEP Credit is a wholly-owned subsidiary of Parent. AEP Credit purchases, without recourse, accounts receivable from certain utility subsidiaries of AEP to reduce working capital requirements. AEP provides a minimum of 5% equity and up to 35% of AEP Credit’s short-term borrowing needs in excess of third-party financings. Any third-party financing of AEP Credit only has recourse to the receivables securitized for such financing. Based on AEP’s control of AEP Credit, management concluded that AEP is the primary beneficiary and is required to consolidate AEP Credit. See the tables below for the classification of AEP Credit’s assets and liabilities on the balance sheets. See “Securitized Accounts Receivables - AEP Credit” section of Note 15.

AEP’s subsidiaries participate in one protected cell of EIS for seven lines of insurance. EIS has multiple protected cells. Neither AEP nor its subsidiaries have an equity investment in EIS. The AEP System is essentially this EIS cell’s only participant, but allows certain third-parties access to this insurance. AEP’s subsidiaries and any allowed third-parties share in the insurance coverage, premiums and risk of loss from claims. Based on AEP’s control and the structure of the protected cell of EIS, management concluded that AEP is the primary beneficiary of the protected cell and is required to consolidate the protected cell of EIS. The insurance premium expense to the protected cell for the years ended December 31, 2025, 2024 and 2023 was $39 million, $37 million and $34 million, respectively. See the tables below for the classification of the protected cell’s assets and liabilities on the balance sheets. The amount reported as equity is the protected cell’s policy holders’ surplus.

Transource Energy was formed for the purpose of investing in utilities which develop, acquire, construct, own and operate transmission facilities in accordance with FERC-approved rates. AEP has an 86.5% equity and voting ownership interest and the remaining 13.5% interest is held by a single third-party owner. Management concluded that Transource Energy is a VIE and that AEP is the primary beneficiary because AEP has the power to direct the most significant activities of the entity and AEP’s equity interest could potentially be significant. Therefore, AEP is required to consolidate Transource Energy. Transource Energy’s activities consist of the development, construction and operation of FERC-regulated transmission assets in Missouri, West Virginia, Pennsylvania, Maryland and Oklahoma. Transource Energy has a credit facility agreement where borrowings are loaned through intercompany lending agreements to its subsidiaries. The creditor to the agreement has no recourse to the general credit of AEP. Transource Energy’s credit facility agreement contains certain covenants and require it to maintain a percentage of debt-to-total capitalization at a level that does not exceed 67.5%. See the tables below for the classification of Transource Energy’s assets and liabilities on the balance sheets.




	December 31, 2025

	Consolidated VIEs
	SWEPCo Sabine		I&M DCC Fuel		AEP Texas Restoration Funding			APCo Appalachian Consumer Rate Relief Funding			SWEPCo Storm Recovery Funding		KPCo Cost Recovery Funding			AEP Credit		Protected Cell of EIS		Transource Energy
	(in millions)
ASSETS
Current Assets	$	1	$	118	$	18		$	18		$	17	$	24		$	1,232	$	223	$	45
Net Property, Plant and Equipment	—		227		—			—			—		—			—		—		658
Other Noncurrent Assets	80		118		98		(a)	79		(b)	312		462		(c)	10		—		4
Total Assets	$	81	$	463	$	116		$	97		$	329	$	486		$	1,242	$	223	$	707

LIABILITIES AND EQUITY
Current Liabilities	$	15	$	118	$	31		$	31		$	23	$	30		$	1,176	$	56	$	50
Noncurrent Liabilities	66		345		84			64			304		454			1		102		298
Equity	—		—		1			2			2		2			65		65		359
Total Liabilities and Equity	$	81	$	463	$	116		$	97		$	329	$	486		$	1,242	$	223	$	707




	December 31, 2024

	Consolidated VIEs
	SWEPCo Sabine		I&M DCC Fuel		AEP Texas Restoration Funding			APCo Appalachian Consumer Rate Relief Funding			SWEPCo Storm Recovery Funding		AEP Credit		Protected Cell of EIS		Transource Energy
	(in millions)
ASSETS
Current Assets	$	6	$	79	$	21		$	14		$	3	$	1,118	$	219	$	40
Net Property, Plant and Equipment	—		132		—			—			—		—		—		598
Other Noncurrent Assets	111		64		122		(a)	110		(b)	332		11		—		4
Total Assets	$	117	$	275	$	143		$	124		$	335	$	1,129	$	219	$	642

LIABILITIES AND EQUITY
Current Liabilities	$	20	$	79	$	31		$	31		$	24	$	1,069	$	55	$	57
Noncurrent Liabilities	96		196		111			91			309		1		96		274
Equity	1		—		1			2			2		59		68		311
Total Liabilities and Equity	$	117	$	275	$	143		$	124		$	335	$	1,129	$	219	$	642

AEPSC, a wholly-owned subsidiary of Parent, is consolidated by AEP. Parent is the sole equity owner of AEPSC and controls the activities of AEPSC. AEPSC provides certain managerial and professional services to AEP’s subsidiaries. The costs of the services are based on a direct-charge or on a prorated basis and billed to the AEP subsidiary companies at AEPSC’s cost. AEP subsidiaries have not provided financial or other support outside of the reimbursement of costs for services rendered. AEPSC finances its operations through cost reimbursement from other AEP subsidiaries. There are no other terms or arrangements between AEPSC and any of the AEP subsidiaries that could require additional financial support from an AEP subsidiary or expose them to losses outside of the normal course of business. AEPSC and its billings are subject to regulation by the FERC. AEP subsidiaries are exposed to losses to the extent they cannot recover the costs of AEPSC through their normal business operations. AEP subsidiaries are considered to have a significant variable interest in AEPSC due to their activity in AEPSC’s cost reimbursement structure. However, AEP subsidiaries do not have control over AEPSC. In the event AEPSC would require financing or other support outside the cost reimbursement billings, this financing would be provided by AEP.

AEGCo, a wholly-owned subsidiary of Parent, is consolidated by AEP. AEGCo owns a 50% ownership interest in Rockport Plant, Units 1 and 2. AEGCo sells its portion of the output from the Rockport Plant to I&M. AEP has agreed to provide AEGCo with the funds necessary to satisfy all the debt obligations of AEGCo. I&M is considered to have a significant variable interest in AEGCo due to these transactions. I&M is exposed to losses to the extent it cannot recover the costs of AEGCo through its normal business operations. In the event AEGCo requires financing or other support outside the billings to I&M, it would be provided by AEP. AEGCo’s billings to I&M for the years ended December 31, 2025, 2024 and 2023 were $268 million, $209 million and $181 million, respectively. The carrying amounts of I&M’s liabilities associated with AEGCo as of December 31, 2025 and 2024 were $19 million and $14 million, respectively. Management estimates the maximum exposure of loss to be equal to the amount of such liabilities.

AEP Development Services, LLC (Devco), a wholly-owned subsidiary of Parent, is consolidated by AEP. Devco was formed for the purpose of developing, constructing and installing energy projects for the regulated operating companies across the AEP system. In the fourth quarter of 2024, Devco executed a purchase agreement with Bloom Energy, acquiring 100 MWs of solid oxide fuel cells. Devco contemporaneously executed an affiliated services agreement with OPCo to establish the terms and conditions for Devco to design, procure, construct and ultimately sell customer-sited, behind-the-meter fuel cell generation facilities to OPCo. Sales of fuel cell generation facilities will be made for OPCo to meet its obligations arising from bilateral customer-sited renewable energy resource agreements (CSRERAs) entered with its commercial customers. Sales are generally expected to close when a fuel cell generation facility is mechanically complete and will be sold at net book value plus reimbursement for the costs of Devco’s services. OPCo will own and operate the fuel cell generation facilities, and sell power produced by them to its customers under the terms of the applicable CSRERAs.

Devco is a VIE because its operations and activities, including the initial 100 MWs purchase of fuel cells from Bloom Energy, are entirely financed by Parent through borrowings from the Nonutility Money Pool. Parent controls the significant activities of Devco and is exposed to its potential losses to the extent sales of completed fuel cell generation facilities to OPCo are insufficient to cover its costs of operations. AEP intends to recover its investment through the fulfillment of contractual commitments to deploy and install fuel cells to provide electricity service to customers. Based on AEP’s control of Devco, management concluded that AEP is the primary beneficiary and is required to consolidate Devco. In addition, OPCo has a noncontrolling variable interest in Devco because of the pricing structure for the sales of fuel cell generation facilities. As of December 31, 2025 and 2024, the amounts of CWIP were $480 million and $457 million, respectively, and borrowings from the Nonutility Money Pool were $485 million and $456 million, respectively, on the balance sheets.

DHLC is a mining operator which previously sold 50% of the lignite produced to SWEPCo and 50% to CLECO. The operations of DHLC are governed by the lignite mining agreement among SWEPCo, CLECO and DHLC. SWEPCo and CLECO share the executive board seats and voting rights equally. In accordance with the lignite mining agreement, each entity is responsible for 50% of DHLC’s obligations, including debt. SWEPCo and CLECO equally approve DHLC’s annual budget. The creditors of DHLC have no recourse to any AEP entity other than SWEPCo. As SWEPCo is the sole equity owner of DHLC, it receives 100% of the management fee earned by DHLC. In April 2020, SWEPCo and CLECO jointly filed a notification letter to the LPSC providing notice of the cessation of lignite mining. SWEPCo’s total billings from DHLC for the years ended December 31, 2025, 2024 and 2023 were not material. DHLC paid dividends of $1 million, $1 million, and $1 million to SWEPCo for the years ended December 31, 2025, 2024 and 2023, respectively. SWEPCo does not have the power to control decision making that significantly impacts the economic performance of DHLC because such power is shared with CLECO. As a result, SWEPCo is not required to consolidate DHLC as it is not the primary beneficiary, although it holds a significant variable interest in DHLC. SWEPCo’s equity investment in DHLC is included in Deferred Charges and Other Noncurrent Assets on SWEPCo’s balance sheets.


	December 31,
	2025				2024
	As Reported on the Balance Sheet		Maximum Exposure		As Reported on the Balance Sheet		Maximum Exposure
	(in millions)
Capital Contribution from SWEPCo	$	7	$	7	$	7	$	7
Retained Earnings	1		1		1		1
SWEPCo’s Share of Obligations	—		11		—		16
Total Investment in DHLC	$	8	$	19	$	8	$	24

AEP and several nonaffiliated utility companies jointly own OVEC. As of December 31, 2025, AEP’s ownership in OVEC was 43.47%. Parent owns 39.17% and OPCo owns 4.3%. APCo, I&M and OPCo are members to an intercompany power agreement. The Registrants’ power participation ratios are 15.69% for APCo, 7.85% for I&M and 19.93% for OPCo. Participants of this agreement are entitled to receive and are obligated to pay for all OVEC generating capacity, approximately 2,400 MWs, in proportion to their respective power participation ratios. The proceeds from the sale of power by OVEC are designed to be sufficient for OVEC to meet its operating expenses and fixed costs, including outstanding indebtedness, and provide a return on capital. The intercompany power agreement ends in June 2040.

AEP and other nonaffiliated owners authorized environmental investments related to their ownership interests. OVEC financed capital expenditures in connection with the engineering and construction of FGD projects and the associated waste disposal landfills at its two generation plants. These environmental projects were funded through debt issuances. As of December 31, 2025 and 2024, OVEC’s outstanding indebtedness was approximately $873 million and $997 million, respectively. Although they are not an obligor or guarantor, the Registrants’ are responsible for their respective ratio of OVEC’s outstanding debt through the intercompany power agreement. Principal and interest payments related to OVEC’s outstanding indebtedness are disclosed in accordance with the accounting guidance for “Commitments.” See the “Commitments” section of Note 6 for additional information.

AEP is not required to consolidate OVEC as it is not the primary beneficiary, although AEP and OPCo each hold a significant variable interest in OVEC. Power to control decision making that significantly impacts the economic performance of OVEC is shared amongst the owners through their representation on the Board of Directors of OVEC and the representation of the sponsoring companies on the Operating Committee under the intercompany power agreement.

In November 2025 and December 2025, OPCo filed applications with the PUCO and FERC, respectively, to transfer its 4.3% ownership in OVEC to Parent and its 19.93% OVEC power participation entitlement to AGR. Upon completion of the transaction, Parent will remain responsible for the financial and other obligations of AGR under the intercompany power agreement. In December 2025, the PUCO approved the application and a decision from the FERC is expected in the first half of 2026.

ETT designs, acquires, constructs, owns and operates certain transmission facilities in ERCOT. BHE, a nonaffiliated entity, holds a 50% membership interest in ETT and AEP Transmission Holdco holds a 50% membership interest in ETT. As a result, AEP, through its wholly-owned subsidiary, holds a 50% membership interest in ETT. As of December 31, 2025 and 2024, AEP’s investment in ETT was $969 million and $897 million, respectively. AEP’s equity earnings associated with ETT were $80 million, $86 million and $74 million for the years ended December 31, 2025, 2024 and 2023, respectively.

In August 2025, AEP and Gigawatt AI, Inc. (GWAI), a privately held company, entered into a new commercial arrangement. GWAI is focused on developing AI-centric operating systems and applications that optimize utility operations and infrastructure. AEP invested $100 million for a 10% ownership interest in the common stock and received a warrant for the option to acquire an additional 5% of GWAI’s common stock for $50 million. Contingent upon GWAI’s achievement of defined performance-based milestones, AEP will invest up to an additional $100 million for up to an additional 10% of GWAI’s common stock. In January 2026, AEP made an additional $25 million investment for an incremental 2.5% interest in GWAI’s common stock because of GWAI’s achievement of a performance-based milestone. In connection with AEP's equity interest, AEP was granted the right to designate one of the three members of GWAI's board of directors. The board position is currently held by an officer of AEP and therefore the investment is a related-party transaction. AEP's board participation provides AEP with direct influence over GWAI's governance and oversight, while GWAI's founders retain all other equity interests and board representation. AEP also acquired a perpetual software license for software developed by GWAI.

The $100 million equity interest is accounted for as an equity method investment due to AEP’s ability to exercise significant influence over certain GWAI policies. As of December 31, 2025, AEP’s carrying value of the investment in GWAI was $100 million, which was initially recognized at cost in Deferred Charges and Other Noncurrent Assets on the balance sheet. AEP’s proportionate share of GWAI’s losses was immaterial for the year ended December 31, 2025.