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Financing Activities
 6 Months Ended
Jun. 30, 2017
Financing Activities
FINANCING ACTIVITIES

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

Long-term Debt Outstanding (Applies to AEP)

The following table details long-term debt outstanding:
Type of Debt
 
June 30, 2017
 
December 31, 2016
 
 
 
(in millions)
 
Senior Unsecured Notes
 
$
14,728.9

 
$
14,761.0

(b)
Pollution Control Bonds
 
1,611.1

 
1,725.1

 
Notes Payable
 
259.7

 
326.9

 
Securitization Bonds
 
1,555.8

 
1,705.0

 
Spent Nuclear Fuel Obligation (a)
 
267.1

 
266.3

 
Other Long-term Debt
 
1,129.3

 
1,606.9

 
Total Long-term Debt Outstanding
 
19,551.9

 
20,391.2

(b)
Long-term Debt Due Within One Year
 
2,755.0

 
3,013.4

(b)
Long-term Debt
 
$
16,796.9

 
$
17,377.8

(b)


(a)
Pursuant to the Nuclear Waste Policy Act of 1982, I&M, a nuclear licensee, has an obligation to the United States Department of Energy for spent nuclear fuel disposal.  The obligation includes a one-time fee for nuclear fuel consumed prior to April 7, 1983.  Trust fund assets related to this obligation were $310 million and $311 million as of June 30, 2017 and December 31, 2016, respectively, and are included in Spent Nuclear Fuel and Decommissioning Trusts on the balance sheets.
(b)
Amounts include debt related to the Lawrenceburg Plant that has been classified as Liabilities Held for Sale on the balance sheet. See “Gavin, Waterford, Darby and Lawrenceburg Plants (Generation & Marketing Segment)” section of Note 6 for additional information.

Long-term Debt Activity

Long-term debt and other securities issued, retired and principal payments made during the first six months of 2017 are shown in the tables below:
Company
 
Type of Debt
 
Principal Amount (a)
 
Interest Rate
 
Due Date
Issuances:
 
 
 
(in millions)
 
(%)
 
 
APCo
 
Senior Unsecured Notes
 
$
325.0

 
3.30
 
2027
I&M
 
Pollution Control Bonds
 
25.0

 
Variable
 
2019
I&M
 
Pollution Control Bonds
 
40.0

 
2.05
 
2021
I&M
 
Pollution Control Bonds
 
52.0

 
Variable
 
2021
I&M
 
Senior Unsecured Notes
 
300.0

 
3.75
 
2047
SWEPCo
 
Other Long-term Debt
 
115.0

 
Variable
 
2020
 
 
 
 


 

 

Non-Registrant:
 
 
 


 

 

KPCo
 
Pollution Control Bonds
 
65.0

 
2.00
 
2020
Transource Missouri
 
Other Long-term Debt
 
7.0

 
Variable
 
2018
Transource Energy
 
Other Long-term Debt
 
132.1

 
Variable
 
2020
Total Issuances
 
 
 
$
1,061.1

 

 


(a)
Amounts indicated on the statements of cash flows are net of issuance costs and premium or discount and will not tie to the issuance amounts.
Company
 
Type of Debt
 
 Principal Amount Paid
 
Interest Rate
 
Due Date
Retirements and Principal Payments:
 
 
 
(in millions)
 
(%)
 
 
APCo
 
Senior Unsecured Notes
 
$
250.0

 
5.00
 
2017
APCo
 
Securitization Bonds
 
11.5

 
2.008
 
2024
APCo
 
Pollution Control Bonds
 
104.4

 
Variable
 
2017
I&M
 
Notes Payable
 
3.3

 
Variable
 
2017
I&M
 
Pollution Control Bonds
 
25.0

 
Variable
 
2017
I&M
 
Notes Payable
 
14.9

 
Variable
 
2019
I&M
 
Notes Payable
 
15.8

 
Variable
 
2019
I&M
 
Notes Payable
 
15.9

 
Variable
 
2020
I&M
 
Pollution Control Bonds
 
52.0

 
Variable
 
2017
I&M
 
Notes Payable
 
15.7

 
Variable
 
2021
I&M
 
Other Long-term Debt
 
0.7

 
6.00
 
2025
I&M
 
Pollution Control Bonds
 
50.0

 
Variable
 
2025
OPCo
 
Securitization Bonds
 
22.5

 
0.958
 
2018
PSO
 
Other Long-term Debt
 
0.2

 
3.00
 
2027
SWEPCo
 
Senior Unsecured Notes
 
250.0

 
5.55
 
2017
SWEPCo
 
Other Long-term Debt
 
100.0

 
Variable
 
2017
SWEPCo
 
Other Long-term Debt
 
0.1

 
3.50
 
2023
SWEPCo
 
Other Long-term Debt
 
0.1

 
4.28
 
2023
SWEPCo
 
Notes Payable
 
1.6

 
4.58
 
2032
 
 
 
 
 
 
 
 
 
Non-Registrant:
 
 
 
 
 
 
 
 
AEGCo
 
Senior Unsecured Notes
 
152.7

 
6.33
 
2037
AGR
 
Other Long-term Debt
 
500.0

 
Variable
 
2017
KPCo
 
Pollution Control Bonds
 
65.0

 
Variable
 
2017
TCC
 
Securitization Bonds
 
27.2

 
0.88
 
2017
TCC
 
Securitization Bonds
 
89.9

 
5.17
 
2018
Transource Missouri
 
Other Long-term Debt
 
130.8

 
Variable
 
2018
Total Retirements and Principal Payments
 
 
 
$
1,899.3

 
 
 
 


In July 2017, I&M retired $5 million of Notes Payable related to DCC Fuel.

In July 2017, OPCo retired $24 million of Securitization Bonds.

In July 2017, AEP Texas retired $71 million of Securitization Bonds.

As of June 30, 2017, trustees held, on behalf of AEP, $728 million of their reacquired Pollution Control Bonds. Of this total, $104 million, $50 million and $345 million related to APCo, I&M and OPCo, respectively.

Debt Covenants (Applies to AEP and AEPTCo)

Covenants in AEPTCo’s note purchase agreements and indenture also limit the amount of contractually-defined priority debt (which includes a further sub-limit of $50 million of secured debt) to 10% of consolidated tangible net assets. The method for calculating the consolidated tangible net assets is contractually defined in the note purchase agreements.
Dividend Restrictions

Utility Subsidiaries’ Restrictions

Parent depends on its utility subsidiaries to pay dividends to shareholders. AEP utility subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the subsidiaries to transfer funds to Parent in the form of dividends.

All of the dividends declared by AEP’s utility subsidiaries that provide transmission or local distribution services are subject to a Federal Power Act restriction that prohibits the payment of dividends out of capital accounts without regulatory approval; payment of dividends is allowed out of retained earnings only. Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generation plants. Because of their ownership of such plants, this reserve applies to AGR, APCo and I&M.

Certain AEP subsidiaries have credit agreements that contain a covenant that limits their debt to capitalization ratio to 67.5%. The payment of cash dividends indirectly results in an increase in the percentage of debt to total capitalization of the AEP subsidiary distributing the dividend. The method for calculating outstanding debt and capitalization is contractually defined in the credit agreements.

As of June 30, 2017, the Federal Power Act restriction does not limit the ability of the AEP subsidiaries to pay dividends out of retained earnings.

Parent Restrictions (Applies to AEP)

The holders of AEP’s common stock are entitled to receive the dividends declared by the Board of Directors provided funds are legally available for such dividends.  Parent’s income primarily derives from common stock equity in the earnings of its utility subsidiaries.

Pursuant to the leverage restrictions in credit agreements, AEP must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%.  The payment of cash dividends indirectly results in an increase in the percentage of debt to total capitalization of the company distributing the dividend.  The method for calculating outstanding debt and capitalization is contractually defined in the credit agreements.

Corporate Borrowing Program - AEP System (Applies to Registrant Subsidiaries)

The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of AEP’s subsidiaries.  The corporate borrowing program includes a Utility Money Pool, which funds AEP’s utility subsidiaries, and a Nonutility Money Pool, which funds certain AEP nonutility subsidiaries.  The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with the FERC.  The amounts of outstanding loans to (borrowings from) the Utility Money Pool as of June 30, 2017 and December 31, 2016 are included in Advances to Affiliates and Advances from Affiliates, respectively, on each of the Registrant Subsidiaries’ balance sheets.  The Utility Money Pool participants’ money pool activity and their corresponding authorized borrowing limits for the six months ended June 30, 2017 are described in the following table:
 
 
Maximum
 
 
 
Average
 
 
 
Net
 
 
 
 
 
Borrowings
 
Maximum
 
Borrowings
 
Average
 
Borrowings from
 
Authorized
 
 
 
from the
 
Loans to the
 
from the
 
Loans to the
 
the Utility Money
 
Short-term
 
 
 
Utility
 
Utility
 
Utility
 
Utility
 
Pool as of
 
Borrowing
 
Company
 
Money Pool
 
Money Pool
 
Money Pool
 
Money Pool
 
June 30, 2017
 
Limit
 
 
 
(in millions)
 
AEPTCo
 
$
333.3

 
$
52.9

 
$
170.7

 
$
12.3

 
$
246.3

 
$
795.0

(a)
APCo
 
231.5

 
160.7

 
179.1

 
36.4

 
100.9

 
600.0

 
I&M
 
367.4

 
12.6

 
258.6

 
12.6

 
30.8

 
500.0

 
OPCo
 
243.7

 
56.2

 
91.7

 
27.9

 
190.5

 
400.0

 
PSO
 
185.2

 
—

 
123.6

 
—

 
141.4

 
300.0

 
SWEPCo
 
187.5

 
178.6

 
132.4

 
169.5

 
58.6

 
350.0

 


(a)
Amount represents the combined authorized short-term borrowing limit the State Transcos have through their agreements with the FERC or state regulatory commissions.

The activity in the above table does not include short-term lending activity of SWEPCo’s wholly-owned subsidiary, Mutual Energy SWEPCo, LLC, which is a participant in the Nonutility Money Pool. The amounts of outstanding loans to the Nonutility Money Pool as of June 30, 2017 and December 31, 2016 are included in Advances to Affiliates on SWEPCo’s balance sheets. For the six months ended June 30, 2017, Mutual Energy SWEPCo, LLC had the following activity in the Nonutility Money Pool:
Maximum
 
Average
 
Loans
Loans
 
Loans
 
to the Nonutility
to the Nonutility
 
to the Nonutility
 
Money Pool as of
Money Pool
 
Money Pool
 
June 30, 2017
(in millions)
$
2.0

 
$
2.0

 
$
2.0



AEP has a direct financing relationship with AEPTCo to meet their short-term borrowing needs. The amounts of outstanding loans to (borrowings from) AEP as of June 30, 2017 and December 31, 2016 are included in Advances to Affiliates and Advances from Affiliates, respectively, on AEPTCo’s balance sheets. AEPTCo’s direct borrowing and lending activity with AEP for the six months ended June 30, 2017 is described in the following table:
Maximum
 
Maximum
 
Average
 
Average
 
Borrowings from
 
Loans to
 
Authorized
Borrowings
 
Loans
 
Borrowings
 
Loans
 
AEP as of
 
AEP as of
 
Short-term
from AEP
 
to AEP
 
from AEP
 
to AEP
 
June 30, 2017
 
June 30, 2017
 
Borrowing Limit
(in millions)
$
1.1

 
$
78.9

 
$
1.1

 
$
34.8

 
$
1.1

 
$
22.2

 
$
75.0



The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:
 
 
Six Months Ended June 30,
 
 
2017
 
2016
Maximum Interest Rate
 
1.44
%
 
0.84
%
Minimum Interest Rate
 
0.92
%
 
0.69
%


The average interest rates for funds borrowed from and loaned to the Utility Money Pool are summarized for all Registrant Subsidiaries in the following table:
 
 
Average Interest Rate
 
Average Interest Rate
 
 
for Funds Borrowed
 
for Funds Loaned
 
 
from the Utility Money Pool for
 
to the Utility Money Pool for
 
 
Six Months Ended June 30,
 
Six Months Ended June 30,
Company
 
2017
 
2016
 
2017
 
2016
AEPTCo
 
1.25
%
 
0.76
%
 
0.99
%
 
0.74
%
APCo
 
1.17
%
 
0.75
%
 
1.22
%
 
0.75
%
I&M
 
1.20
%
 
0.72
%
 
1.18
%
 
0.75
%
OPCo
 
1.31
%
 
0.79
%
 
0.98
%
 
0.74
%
PSO
 
1.23
%
 
0.76
%
 
—
%
 
0.73
%
SWEPCo
 
1.20
%
 
0.75
%
 
0.98
%
 
—
%


Maximum, minimum and average interest rates for funds loaned to the Nonutility Money Pool are summarized for Mutual Energy SWEPCo, LLC in the following table:
 
 
Maximum
 
Minimum
 
Average
 
 
Interest Rate
 
Interest Rate
 
Interest Rate
Six Months
 
for Funds Loaned
 
for Funds Loaned
 
for Funds Loaned
Ended
 
to the Nonutility
 
 to the Nonutility
 
to the Nonutility
June 30,
Money Pool
 
Money Pool
 
Money Pool
2017
 
1.44
%
 
—
%
 
1.17
%
2016
 
0.84
%
 
0.69
%
 
0.75
%


AEPTCo’s maximum, minimum and average interest rates for funds either borrowed from or loaned to AEP are summarized in the following table:
 
 
Maximum
 
Minimum
 
Maximum
 
Minimum
 
Average
 
Average
 
 
Interest Rate
 
Interest Rate
 
Interest Rate
 
Interest Rate
 
Interest Rate
 
Interest Rate
Six Months
 
for Funds
 
for Funds
 
for Funds
 
for Funds
 
for Funds
 
for Funds
Ended
 
Borrowed
 
Borrowed
 
Loaned
 
Loaned
 
Borrowed
 
Loaned
June 30,
 
from AEP
 
from AEP
to AEP
 
to AEP
 
from AEP
 
to AEP
2017
 
1.44
%
 
0.92
%
 
1.44
%
 
0.92
%
 
1.18
%
 
1.21
%
2016
 
0.84
%
 
0.69
%
 
0.84
%
 
0.69
%
 
0.75
%
 
0.75
%


Short-term Debt (Applies to AEP and SWEPCo)

Outstanding short-term debt was as follows:
 
 
 
 
June 30, 2017
 
December 31, 2016
Company
 
Type of Debt
 
Outstanding
Amount
 
Interest
Rate (a)
 
Outstanding
Amount
 
Interest
Rate (a)
 
 
 
 
(in millions)
 
 
 
(in millions)
 
 
AEP
 
Securitized Debt for Receivables (b)
 
$
519.0

 
1.09
%
 
$
673.0

 
0.70
%
AEP
 
Commercial Paper
 
1,324.0

 
1.43
%
 
1,040.0

 
1.02
%
SWEPCo
 
Notes Payable
 
8.7

 
2.77
%
 
—

 
—
%
 
 
Total Short-term Debt
 
$
1,851.7

 
 

 
$
1,713.0

 
 


(a)
Weighted average rate.
(b)
Amount of securitized debt for receivables as accounted for under the “Transfers and Servicing” accounting guidance.

Credit Facilities

For a discussion of credit facilities, see “Letters of Credit” section of Note 5.

Securitized Accounts Receivables – AEP Credit (Applies to AEP)

AEP Credit has a receivables securitization agreement with bank conduits.  Under the securitization agreement, AEP Credit receives financing from the bank conduits for the interest in the receivables AEP Credit acquires from affiliated utility subsidiaries.  These securitized transactions allow AEP Credit to repay its outstanding debt obligations, continue to purchase the operating companies’ receivables and accelerate AEP Credit’s cash collections.

AEP Credit’s receivables securitization agreement provides a commitment of $750 million from bank conduits to purchase receivables and expires in June 2019.

Accounts receivable information for AEP Credit is as follows:
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
(dollars in millions)
Effective Interest Rates on Securitization of Accounts Receivable
 
1.17
%
 
0.63
%
 
1.09
%
 
0.61
%
Net Uncollectible Accounts Receivable Written Off
 
$
5.3

 
$
4.1

 
$
11.2

 
$
9.8


 
 
June 30, 2017
 
December 31, 2016
 
 
(in millions)
Accounts Receivable Retained Interest and Pledged as Collateral Less Uncollectible Accounts
 
$
921.7

 
$
945.0

Short-term – Securitized Debt of Receivables
 
519.0

 
673.0

Delinquent Securitized Accounts Receivable
 
44.3

 
42.7

Bad Debt Reserves Related to Securitization
 
27.7

 
27.7

Unbilled Receivables Related to Securitization
 
347.9

 
322.1



AEP Credit’s delinquent customer accounts receivable represent accounts greater than 30 days past due.

Securitized Accounts Receivables – AEP Credit (Applies to Registrant Subsidiaries, except AEPTCo)

Under this sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit’s financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary’s receivables.  APCo does not have regulatory authority to sell its West Virginia accounts receivable.  The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries’ statements of income.  The Registrant Subsidiaries manage and service their customer accounts receivable, which are sold to AEP Credit. AEP Credit securitizes the eligible receivables for the operating companies and retains the remainder.

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary was as follows:
Company
 
June 30, 2017
 
December 31, 2016
 
 
(in millions)
APCo
 
$
127.5

 
$
142.0

I&M
 
145.6

 
136.7

OPCo
 
322.4

 
388.3

PSO
 
136.1

 
110.4

SWEPCo
 
163.5

 
130.9



The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Company
 
2017
 
2016
 
2017
 
2016
 
 
(in millions)
APCo
 
$
1.3

 
$
2.0

 
$
2.7

 
$
3.8

I&M
 
1.6

 
1.7

 
3.1

 
3.6

OPCo
 
4.7

 
7.4

 
10.4

 
15.3

PSO
 
1.7

 
1.5

 
3.2

 
2.9

SWEPCo
 
1.8

 
1.7

 
3.4

 
3.2



The Registrant Subsidiaries’ proceeds on the sale of receivables to AEP Credit were:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Company
 
2017
 
2016
 
2017
 
2016
 
 
(in millions)
APCo
 
$
324.2

 
$
325.5

 
$
693.9

 
$
709.9

I&M
 
390.7

 
384.1

 
809.0

 
772.2

OPCo
 
493.1

 
613.7

 
1,125.4

 
1,260.3

PSO
 
328.7

 
309.2

 
615.5

 
581.3

SWEPCo
 
404.6

 
387.4

 
745.8

 
723.5
AEP Transmission Co [Member]  
Financing Activities
FINANCING ACTIVITIES

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

Long-term Debt Outstanding (Applies to AEP)

The following table details long-term debt outstanding:
Type of Debt
 
June 30, 2017
 
December 31, 2016
 
 
 
(in millions)
 
Senior Unsecured Notes
 
$
14,728.9

 
$
14,761.0

(b)
Pollution Control Bonds
 
1,611.1

 
1,725.1

 
Notes Payable
 
259.7

 
326.9

 
Securitization Bonds
 
1,555.8

 
1,705.0

 
Spent Nuclear Fuel Obligation (a)
 
267.1

 
266.3

 
Other Long-term Debt
 
1,129.3

 
1,606.9

 
Total Long-term Debt Outstanding
 
19,551.9

 
20,391.2

(b)
Long-term Debt Due Within One Year
 
2,755.0

 
3,013.4

(b)
Long-term Debt
 
$
16,796.9

 
$
17,377.8

(b)


(a)
Pursuant to the Nuclear Waste Policy Act of 1982, I&M, a nuclear licensee, has an obligation to the United States Department of Energy for spent nuclear fuel disposal.  The obligation includes a one-time fee for nuclear fuel consumed prior to April 7, 1983.  Trust fund assets related to this obligation were $310 million and $311 million as of June 30, 2017 and December 31, 2016, respectively, and are included in Spent Nuclear Fuel and Decommissioning Trusts on the balance sheets.
(b)
Amounts include debt related to the Lawrenceburg Plant that has been classified as Liabilities Held for Sale on the balance sheet. See “Gavin, Waterford, Darby and Lawrenceburg Plants (Generation & Marketing Segment)” section of Note 6 for additional information.

Long-term Debt Activity

Long-term debt and other securities issued, retired and principal payments made during the first six months of 2017 are shown in the tables below:
Company
 
Type of Debt
 
Principal Amount (a)
 
Interest Rate
 
Due Date
Issuances:
 
 
 
(in millions)
 
(%)
 
 
APCo
 
Senior Unsecured Notes
 
$
325.0

 
3.30
 
2027
I&M
 
Pollution Control Bonds
 
25.0

 
Variable
 
2019
I&M
 
Pollution Control Bonds
 
40.0

 
2.05
 
2021
I&M
 
Pollution Control Bonds
 
52.0

 
Variable
 
2021
I&M
 
Senior Unsecured Notes
 
300.0

 
3.75
 
2047
SWEPCo
 
Other Long-term Debt
 
115.0

 
Variable
 
2020
 
 
 
 


 

 

Non-Registrant:
 
 
 


 

 

KPCo
 
Pollution Control Bonds
 
65.0

 
2.00
 
2020
Transource Missouri
 
Other Long-term Debt
 
7.0

 
Variable
 
2018
Transource Energy
 
Other Long-term Debt
 
132.1

 
Variable
 
2020
Total Issuances
 
 
 
$
1,061.1

 

 


(a)
Amounts indicated on the statements of cash flows are net of issuance costs and premium or discount and will not tie to the issuance amounts.
Company
 
Type of Debt
 
 Principal Amount Paid
 
Interest Rate
 
Due Date
Retirements and Principal Payments:
 
 
 
(in millions)
 
(%)
 
 
APCo
 
Senior Unsecured Notes
 
$
250.0

 
5.00
 
2017
APCo
 
Securitization Bonds
 
11.5

 
2.008
 
2024
APCo
 
Pollution Control Bonds
 
104.4

 
Variable
 
2017
I&M
 
Notes Payable
 
3.3

 
Variable
 
2017
I&M
 
Pollution Control Bonds
 
25.0

 
Variable
 
2017
I&M
 
Notes Payable
 
14.9

 
Variable
 
2019
I&M
 
Notes Payable
 
15.8

 
Variable
 
2019
I&M
 
Notes Payable
 
15.9

 
Variable
 
2020
I&M
 
Pollution Control Bonds
 
52.0

 
Variable
 
2017
I&M
 
Notes Payable
 
15.7

 
Variable
 
2021
I&M
 
Other Long-term Debt
 
0.7

 
6.00
 
2025
I&M
 
Pollution Control Bonds
 
50.0

 
Variable
 
2025
OPCo
 
Securitization Bonds
 
22.5

 
0.958
 
2018
PSO
 
Other Long-term Debt
 
0.2

 
3.00
 
2027
SWEPCo
 
Senior Unsecured Notes
 
250.0

 
5.55
 
2017
SWEPCo
 
Other Long-term Debt
 
100.0

 
Variable
 
2017
SWEPCo
 
Other Long-term Debt
 
0.1

 
3.50
 
2023
SWEPCo
 
Other Long-term Debt
 
0.1

 
4.28
 
2023
SWEPCo
 
Notes Payable
 
1.6

 
4.58
 
2032
 
 
 
 
 
 
 
 
 
Non-Registrant:
 
 
 
 
 
 
 
 
AEGCo
 
Senior Unsecured Notes
 
152.7

 
6.33
 
2037
AGR
 
Other Long-term Debt
 
500.0

 
Variable
 
2017
KPCo
 
Pollution Control Bonds
 
65.0

 
Variable
 
2017
TCC
 
Securitization Bonds
 
27.2

 
0.88
 
2017
TCC
 
Securitization Bonds
 
89.9

 
5.17
 
2018
Transource Missouri
 
Other Long-term Debt
 
130.8

 
Variable
 
2018
Total Retirements and Principal Payments
 
 
 
$
1,899.3

 
 
 
 


In July 2017, I&M retired $5 million of Notes Payable related to DCC Fuel.

In July 2017, OPCo retired $24 million of Securitization Bonds.

In July 2017, AEP Texas retired $71 million of Securitization Bonds.

As of June 30, 2017, trustees held, on behalf of AEP, $728 million of their reacquired Pollution Control Bonds. Of this total, $104 million, $50 million and $345 million related to APCo, I&M and OPCo, respectively.

Debt Covenants (Applies to AEP and AEPTCo)

Covenants in AEPTCo’s note purchase agreements and indenture also limit the amount of contractually-defined priority debt (which includes a further sub-limit of $50 million of secured debt) to 10% of consolidated tangible net assets. The method for calculating the consolidated tangible net assets is contractually defined in the note purchase agreements.
Dividend Restrictions

Utility Subsidiaries’ Restrictions

Parent depends on its utility subsidiaries to pay dividends to shareholders. AEP utility subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the subsidiaries to transfer funds to Parent in the form of dividends.

All of the dividends declared by AEP’s utility subsidiaries that provide transmission or local distribution services are subject to a Federal Power Act restriction that prohibits the payment of dividends out of capital accounts without regulatory approval; payment of dividends is allowed out of retained earnings only. Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generation plants. Because of their ownership of such plants, this reserve applies to AGR, APCo and I&M.

Certain AEP subsidiaries have credit agreements that contain a covenant that limits their debt to capitalization ratio to 67.5%. The payment of cash dividends indirectly results in an increase in the percentage of debt to total capitalization of the AEP subsidiary distributing the dividend. The method for calculating outstanding debt and capitalization is contractually defined in the credit agreements.

As of June 30, 2017, the Federal Power Act restriction does not limit the ability of the AEP subsidiaries to pay dividends out of retained earnings.

Parent Restrictions (Applies to AEP)

The holders of AEP’s common stock are entitled to receive the dividends declared by the Board of Directors provided funds are legally available for such dividends.  Parent’s income primarily derives from common stock equity in the earnings of its utility subsidiaries.

Pursuant to the leverage restrictions in credit agreements, AEP must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%.  The payment of cash dividends indirectly results in an increase in the percentage of debt to total capitalization of the company distributing the dividend.  The method for calculating outstanding debt and capitalization is contractually defined in the credit agreements.

Corporate Borrowing Program - AEP System (Applies to Registrant Subsidiaries)

The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of AEP’s subsidiaries.  The corporate borrowing program includes a Utility Money Pool, which funds AEP’s utility subsidiaries, and a Nonutility Money Pool, which funds certain AEP nonutility subsidiaries.  The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with the FERC.  The amounts of outstanding loans to (borrowings from) the Utility Money Pool as of June 30, 2017 and December 31, 2016 are included in Advances to Affiliates and Advances from Affiliates, respectively, on each of the Registrant Subsidiaries’ balance sheets.  The Utility Money Pool participants’ money pool activity and their corresponding authorized borrowing limits for the six months ended June 30, 2017 are described in the following table:
 
 
Maximum
 
 
 
Average
 
 
 
Net
 
 
 
 
 
Borrowings
 
Maximum
 
Borrowings
 
Average
 
Borrowings from
 
Authorized
 
 
 
from the
 
Loans to the
 
from the
 
Loans to the
 
the Utility Money
 
Short-term
 
 
 
Utility
 
Utility
 
Utility
 
Utility
 
Pool as of
 
Borrowing
 
Company
 
Money Pool
 
Money Pool
 
Money Pool
 
Money Pool
 
June 30, 2017
 
Limit
 
 
 
(in millions)
 
AEPTCo
 
$
333.3

 
$
52.9

 
$
170.7

 
$
12.3

 
$
246.3

 
$
795.0

(a)
APCo
 
231.5

 
160.7

 
179.1

 
36.4

 
100.9

 
600.0

 
I&M
 
367.4

 
12.6

 
258.6

 
12.6

 
30.8

 
500.0

 
OPCo
 
243.7

 
56.2

 
91.7

 
27.9

 
190.5

 
400.0

 
PSO
 
185.2

 
—

 
123.6

 
—

 
141.4

 
300.0

 
SWEPCo
 
187.5

 
178.6

 
132.4

 
169.5

 
58.6

 
350.0

 


(a)
Amount represents the combined authorized short-term borrowing limit the State Transcos have through their agreements with the FERC or state regulatory commissions.

The activity in the above table does not include short-term lending activity of SWEPCo’s wholly-owned subsidiary, Mutual Energy SWEPCo, LLC, which is a participant in the Nonutility Money Pool. The amounts of outstanding loans to the Nonutility Money Pool as of June 30, 2017 and December 31, 2016 are included in Advances to Affiliates on SWEPCo’s balance sheets. For the six months ended June 30, 2017, Mutual Energy SWEPCo, LLC had the following activity in the Nonutility Money Pool:
Maximum
 
Average
 
Loans
Loans
 
Loans
 
to the Nonutility
to the Nonutility
 
to the Nonutility
 
Money Pool as of
Money Pool
 
Money Pool
 
June 30, 2017
(in millions)
$
2.0

 
$
2.0

 
$
2.0



AEP has a direct financing relationship with AEPTCo to meet their short-term borrowing needs. The amounts of outstanding loans to (borrowings from) AEP as of June 30, 2017 and December 31, 2016 are included in Advances to Affiliates and Advances from Affiliates, respectively, on AEPTCo’s balance sheets. AEPTCo’s direct borrowing and lending activity with AEP for the six months ended June 30, 2017 is described in the following table:
Maximum
 
Maximum
 
Average
 
Average
 
Borrowings from
 
Loans to
 
Authorized
Borrowings
 
Loans
 
Borrowings
 
Loans
 
AEP as of
 
AEP as of
 
Short-term
from AEP
 
to AEP
 
from AEP
 
to AEP
 
June 30, 2017
 
June 30, 2017
 
Borrowing Limit
(in millions)
$
1.1

 
$
78.9

 
$
1.1

 
$
34.8

 
$
1.1

 
$
22.2

 
$
75.0



The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:
 
 
Six Months Ended June 30,
 
 
2017
 
2016
Maximum Interest Rate
 
1.44
%
 
0.84
%
Minimum Interest Rate
 
0.92
%
 
0.69
%


The average interest rates for funds borrowed from and loaned to the Utility Money Pool are summarized for all Registrant Subsidiaries in the following table:
 
 
Average Interest Rate
 
Average Interest Rate
 
 
for Funds Borrowed
 
for Funds Loaned
 
 
from the Utility Money Pool for
 
to the Utility Money Pool for
 
 
Six Months Ended June 30,
 
Six Months Ended June 30,
Company
 
2017
 
2016
 
2017
 
2016
AEPTCo
 
1.25
%
 
0.76
%
 
0.99
%
 
0.74
%
APCo
 
1.17
%
 
0.75
%
 
1.22
%
 
0.75
%
I&M
 
1.20
%
 
0.72
%
 
1.18
%
 
0.75
%
OPCo
 
1.31
%
 
0.79
%
 
0.98
%
 
0.74
%
PSO
 
1.23
%
 
0.76
%
 
—
%
 
0.73
%
SWEPCo
 
1.20
%
 
0.75
%
 
0.98
%
 
—
%


Maximum, minimum and average interest rates for funds loaned to the Nonutility Money Pool are summarized for Mutual Energy SWEPCo, LLC in the following table:
 
 
Maximum
 
Minimum
 
Average
 
 
Interest Rate
 
Interest Rate
 
Interest Rate
Six Months
 
for Funds Loaned
 
for Funds Loaned
 
for Funds Loaned
Ended
 
to the Nonutility
 
 to the Nonutility
 
to the Nonutility
June 30,
Money Pool
 
Money Pool
 
Money Pool
2017
 
1.44
%
 
—
%
 
1.17
%
2016
 
0.84
%
 
0.69
%
 
0.75
%


AEPTCo’s maximum, minimum and average interest rates for funds either borrowed from or loaned to AEP are summarized in the following table:
 
 
Maximum
 
Minimum
 
Maximum
 
Minimum
 
Average
 
Average
 
 
Interest Rate
 
Interest Rate
 
Interest Rate
 
Interest Rate
 
Interest Rate
 
Interest Rate
Six Months
 
for Funds
 
for Funds
 
for Funds
 
for Funds
 
for Funds
 
for Funds
Ended
 
Borrowed
 
Borrowed
 
Loaned
 
Loaned
 
Borrowed
 
Loaned
June 30,
 
from AEP
 
from AEP
to AEP
 
to AEP
 
from AEP
 
to AEP
2017
 
1.44
%
 
0.92
%
 
1.44
%
 
0.92
%
 
1.18
%
 
1.21
%
2016
 
0.84
%
 
0.69
%
 
0.84
%
 
0.69
%
 
0.75
%
 
0.75
%


Short-term Debt (Applies to AEP and SWEPCo)

Outstanding short-term debt was as follows:
 
 
 
 
June 30, 2017
 
December 31, 2016
Company
 
Type of Debt
 
Outstanding
Amount
 
Interest
Rate (a)
 
Outstanding
Amount
 
Interest
Rate (a)
 
 
 
 
(in millions)
 
 
 
(in millions)
 
 
AEP
 
Securitized Debt for Receivables (b)
 
$
519.0

 
1.09
%
 
$
673.0

 
0.70
%
AEP
 
Commercial Paper
 
1,324.0

 
1.43
%
 
1,040.0

 
1.02
%
SWEPCo
 
Notes Payable
 
8.7

 
2.77
%
 
—

 
—
%
 
 
Total Short-term Debt
 
$
1,851.7

 
 

 
$
1,713.0

 
 


(a)
Weighted average rate.
(b)
Amount of securitized debt for receivables as accounted for under the “Transfers and Servicing” accounting guidance.

Credit Facilities

For a discussion of credit facilities, see “Letters of Credit” section of Note 5.

Securitized Accounts Receivables – AEP Credit (Applies to AEP)

AEP Credit has a receivables securitization agreement with bank conduits.  Under the securitization agreement, AEP Credit receives financing from the bank conduits for the interest in the receivables AEP Credit acquires from affiliated utility subsidiaries.  These securitized transactions allow AEP Credit to repay its outstanding debt obligations, continue to purchase the operating companies’ receivables and accelerate AEP Credit’s cash collections.

AEP Credit’s receivables securitization agreement provides a commitment of $750 million from bank conduits to purchase receivables and expires in June 2019.

Accounts receivable information for AEP Credit is as follows:
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
(dollars in millions)
Effective Interest Rates on Securitization of Accounts Receivable
 
1.17
%
 
0.63
%
 
1.09
%
 
0.61
%
Net Uncollectible Accounts Receivable Written Off
 
$
5.3

 
$
4.1

 
$
11.2

 
$
9.8


 
 
June 30, 2017
 
December 31, 2016
 
 
(in millions)
Accounts Receivable Retained Interest and Pledged as Collateral Less Uncollectible Accounts
 
$
921.7

 
$
945.0

Short-term – Securitized Debt of Receivables
 
519.0

 
673.0

Delinquent Securitized Accounts Receivable
 
44.3

 
42.7

Bad Debt Reserves Related to Securitization
 
27.7

 
27.7

Unbilled Receivables Related to Securitization
 
347.9

 
322.1



AEP Credit’s delinquent customer accounts receivable represent accounts greater than 30 days past due.

Securitized Accounts Receivables – AEP Credit (Applies to Registrant Subsidiaries, except AEPTCo)

Under this sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit’s financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary’s receivables.  APCo does not have regulatory authority to sell its West Virginia accounts receivable.  The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries’ statements of income.  The Registrant Subsidiaries manage and service their customer accounts receivable, which are sold to AEP Credit. AEP Credit securitizes the eligible receivables for the operating companies and retains the remainder.

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary was as follows:
Company
 
June 30, 2017
 
December 31, 2016
 
 
(in millions)
APCo
 
$
127.5

 
$
142.0

I&M
 
145.6

 
136.7

OPCo
 
322.4

 
388.3

PSO
 
136.1

 
110.4

SWEPCo
 
163.5

 
130.9



The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Company
 
2017
 
2016
 
2017
 
2016
 
 
(in millions)
APCo
 
$
1.3

 
$
2.0

 
$
2.7

 
$
3.8

I&M
 
1.6

 
1.7

 
3.1

 
3.6

OPCo
 
4.7

 
7.4

 
10.4

 
15.3

PSO
 
1.7

 
1.5

 
3.2

 
2.9

SWEPCo
 
1.8

 
1.7

 
3.4

 
3.2



The Registrant Subsidiaries’ proceeds on the sale of receivables to AEP Credit were:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Company
 
2017
 
2016
 
2017
 
2016
 
 
(in millions)
APCo
 
$
324.2

 
$
325.5

 
$
693.9

 
$
709.9

I&M
 
390.7

 
384.1

 
809.0

 
772.2

OPCo
 
493.1

 
613.7

 
1,125.4

 
1,260.3

PSO
 
328.7

 
309.2

 
615.5

 
581.3

SWEPCo
 
404.6

 
387.4

 
745.8

 
723.5
Appalachian Power Co [Member]  
Financing Activities
FINANCING ACTIVITIES

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

Long-term Debt Outstanding (Applies to AEP)

The following table details long-term debt outstanding:
Type of Debt
 
June 30, 2017
 
December 31, 2016
 
 
 
(in millions)
 
Senior Unsecured Notes
 
$
14,728.9

 
$
14,761.0

(b)
Pollution Control Bonds
 
1,611.1

 
1,725.1

 
Notes Payable
 
259.7

 
326.9

 
Securitization Bonds
 
1,555.8

 
1,705.0

 
Spent Nuclear Fuel Obligation (a)
 
267.1

 
266.3

 
Other Long-term Debt
 
1,129.3

 
1,606.9

 
Total Long-term Debt Outstanding
 
19,551.9

 
20,391.2

(b)
Long-term Debt Due Within One Year
 
2,755.0

 
3,013.4

(b)
Long-term Debt
 
$
16,796.9

 
$
17,377.8

(b)


(a)
Pursuant to the Nuclear Waste Policy Act of 1982, I&M, a nuclear licensee, has an obligation to the United States Department of Energy for spent nuclear fuel disposal.  The obligation includes a one-time fee for nuclear fuel consumed prior to April 7, 1983.  Trust fund assets related to this obligation were $310 million and $311 million as of June 30, 2017 and December 31, 2016, respectively, and are included in Spent Nuclear Fuel and Decommissioning Trusts on the balance sheets.
(b)
Amounts include debt related to the Lawrenceburg Plant that has been classified as Liabilities Held for Sale on the balance sheet. See “Gavin, Waterford, Darby and Lawrenceburg Plants (Generation & Marketing Segment)” section of Note 6 for additional information.

Long-term Debt Activity

Long-term debt and other securities issued, retired and principal payments made during the first six months of 2017 are shown in the tables below:
Company
 
Type of Debt
 
Principal Amount (a)
 
Interest Rate
 
Due Date
Issuances:
 
 
 
(in millions)
 
(%)
 
 
APCo
 
Senior Unsecured Notes
 
$
325.0

 
3.30
 
2027
I&M
 
Pollution Control Bonds
 
25.0

 
Variable
 
2019
I&M
 
Pollution Control Bonds
 
40.0

 
2.05
 
2021
I&M
 
Pollution Control Bonds
 
52.0

 
Variable
 
2021
I&M
 
Senior Unsecured Notes
 
300.0

 
3.75
 
2047
SWEPCo
 
Other Long-term Debt
 
115.0

 
Variable
 
2020
 
 
 
 


 

 

Non-Registrant:
 
 
 


 

 

KPCo
 
Pollution Control Bonds
 
65.0

 
2.00
 
2020
Transource Missouri
 
Other Long-term Debt
 
7.0

 
Variable
 
2018
Transource Energy
 
Other Long-term Debt
 
132.1

 
Variable
 
2020
Total Issuances
 
 
 
$
1,061.1

 

 


(a)
Amounts indicated on the statements of cash flows are net of issuance costs and premium or discount and will not tie to the issuance amounts.
Company
 
Type of Debt
 
 Principal Amount Paid
 
Interest Rate
 
Due Date
Retirements and Principal Payments:
 
 
 
(in millions)
 
(%)
 
 
APCo
 
Senior Unsecured Notes
 
$
250.0

 
5.00
 
2017
APCo
 
Securitization Bonds
 
11.5

 
2.008
 
2024
APCo
 
Pollution Control Bonds
 
104.4

 
Variable
 
2017
I&M
 
Notes Payable
 
3.3

 
Variable
 
2017
I&M
 
Pollution Control Bonds
 
25.0

 
Variable
 
2017
I&M
 
Notes Payable
 
14.9

 
Variable
 
2019
I&M
 
Notes Payable
 
15.8

 
Variable
 
2019
I&M
 
Notes Payable
 
15.9

 
Variable
 
2020
I&M
 
Pollution Control Bonds
 
52.0

 
Variable
 
2017
I&M
 
Notes Payable
 
15.7

 
Variable
 
2021
I&M
 
Other Long-term Debt
 
0.7

 
6.00
 
2025
I&M
 
Pollution Control Bonds
 
50.0

 
Variable
 
2025
OPCo
 
Securitization Bonds
 
22.5

 
0.958
 
2018
PSO
 
Other Long-term Debt
 
0.2

 
3.00
 
2027
SWEPCo
 
Senior Unsecured Notes
 
250.0

 
5.55
 
2017
SWEPCo
 
Other Long-term Debt
 
100.0

 
Variable
 
2017
SWEPCo
 
Other Long-term Debt
 
0.1

 
3.50
 
2023
SWEPCo
 
Other Long-term Debt
 
0.1

 
4.28
 
2023
SWEPCo
 
Notes Payable
 
1.6

 
4.58
 
2032
 
 
 
 
 
 
 
 
 
Non-Registrant:
 
 
 
 
 
 
 
 
AEGCo
 
Senior Unsecured Notes
 
152.7

 
6.33
 
2037
AGR
 
Other Long-term Debt
 
500.0

 
Variable
 
2017
KPCo
 
Pollution Control Bonds
 
65.0

 
Variable
 
2017
TCC
 
Securitization Bonds
 
27.2

 
0.88
 
2017
TCC
 
Securitization Bonds
 
89.9

 
5.17
 
2018
Transource Missouri
 
Other Long-term Debt
 
130.8

 
Variable
 
2018
Total Retirements and Principal Payments
 
 
 
$
1,899.3

 
 
 
 


In July 2017, I&M retired $5 million of Notes Payable related to DCC Fuel.

In July 2017, OPCo retired $24 million of Securitization Bonds.

In July 2017, AEP Texas retired $71 million of Securitization Bonds.

As of June 30, 2017, trustees held, on behalf of AEP, $728 million of their reacquired Pollution Control Bonds. Of this total, $104 million, $50 million and $345 million related to APCo, I&M and OPCo, respectively.

Debt Covenants (Applies to AEP and AEPTCo)

Covenants in AEPTCo’s note purchase agreements and indenture also limit the amount of contractually-defined priority debt (which includes a further sub-limit of $50 million of secured debt) to 10% of consolidated tangible net assets. The method for calculating the consolidated tangible net assets is contractually defined in the note purchase agreements.
Dividend Restrictions

Utility Subsidiaries’ Restrictions

Parent depends on its utility subsidiaries to pay dividends to shareholders. AEP utility subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the subsidiaries to transfer funds to Parent in the form of dividends.

All of the dividends declared by AEP’s utility subsidiaries that provide transmission or local distribution services are subject to a Federal Power Act restriction that prohibits the payment of dividends out of capital accounts without regulatory approval; payment of dividends is allowed out of retained earnings only. Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generation plants. Because of their ownership of such plants, this reserve applies to AGR, APCo and I&M.

Certain AEP subsidiaries have credit agreements that contain a covenant that limits their debt to capitalization ratio to 67.5%. The payment of cash dividends indirectly results in an increase in the percentage of debt to total capitalization of the AEP subsidiary distributing the dividend. The method for calculating outstanding debt and capitalization is contractually defined in the credit agreements.

As of June 30, 2017, the Federal Power Act restriction does not limit the ability of the AEP subsidiaries to pay dividends out of retained earnings.

Parent Restrictions (Applies to AEP)

The holders of AEP’s common stock are entitled to receive the dividends declared by the Board of Directors provided funds are legally available for such dividends.  Parent’s income primarily derives from common stock equity in the earnings of its utility subsidiaries.

Pursuant to the leverage restrictions in credit agreements, AEP must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%.  The payment of cash dividends indirectly results in an increase in the percentage of debt to total capitalization of the company distributing the dividend.  The method for calculating outstanding debt and capitalization is contractually defined in the credit agreements.

Corporate Borrowing Program - AEP System (Applies to Registrant Subsidiaries)

The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of AEP’s subsidiaries.  The corporate borrowing program includes a Utility Money Pool, which funds AEP’s utility subsidiaries, and a Nonutility Money Pool, which funds certain AEP nonutility subsidiaries.  The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with the FERC.  The amounts of outstanding loans to (borrowings from) the Utility Money Pool as of June 30, 2017 and December 31, 2016 are included in Advances to Affiliates and Advances from Affiliates, respectively, on each of the Registrant Subsidiaries’ balance sheets.  The Utility Money Pool participants’ money pool activity and their corresponding authorized borrowing limits for the six months ended June 30, 2017 are described in the following table:
 
 
Maximum
 
 
 
Average
 
 
 
Net
 
 
 
 
 
Borrowings
 
Maximum
 
Borrowings
 
Average
 
Borrowings from
 
Authorized
 
 
 
from the
 
Loans to the
 
from the
 
Loans to the
 
the Utility Money
 
Short-term
 
 
 
Utility
 
Utility
 
Utility
 
Utility
 
Pool as of
 
Borrowing
 
Company
 
Money Pool
 
Money Pool
 
Money Pool
 
Money Pool
 
June 30, 2017
 
Limit
 
 
 
(in millions)
 
AEPTCo
 
$
333.3

 
$
52.9

 
$
170.7

 
$
12.3

 
$
246.3

 
$
795.0

(a)
APCo
 
231.5

 
160.7

 
179.1

 
36.4

 
100.9

 
600.0

 
I&M
 
367.4

 
12.6

 
258.6

 
12.6

 
30.8

 
500.0

 
OPCo
 
243.7

 
56.2

 
91.7

 
27.9

 
190.5

 
400.0

 
PSO
 
185.2

 
—

 
123.6

 
—

 
141.4

 
300.0

 
SWEPCo
 
187.5

 
178.6

 
132.4

 
169.5

 
58.6

 
350.0

 


(a)
Amount represents the combined authorized short-term borrowing limit the State Transcos have through their agreements with the FERC or state regulatory commissions.

The activity in the above table does not include short-term lending activity of SWEPCo’s wholly-owned subsidiary, Mutual Energy SWEPCo, LLC, which is a participant in the Nonutility Money Pool. The amounts of outstanding loans to the Nonutility Money Pool as of June 30, 2017 and December 31, 2016 are included in Advances to Affiliates on SWEPCo’s balance sheets. For the six months ended June 30, 2017, Mutual Energy SWEPCo, LLC had the following activity in the Nonutility Money Pool:
Maximum
 
Average
 
Loans
Loans
 
Loans
 
to the Nonutility
to the Nonutility
 
to the Nonutility
 
Money Pool as of
Money Pool
 
Money Pool
 
June 30, 2017
(in millions)
$
2.0

 
$
2.0

 
$
2.0



AEP has a direct financing relationship with AEPTCo to meet their short-term borrowing needs. The amounts of outstanding loans to (borrowings from) AEP as of June 30, 2017 and December 31, 2016 are included in Advances to Affiliates and Advances from Affiliates, respectively, on AEPTCo’s balance sheets. AEPTCo’s direct borrowing and lending activity with AEP for the six months ended June 30, 2017 is described in the following table:
Maximum
 
Maximum
 
Average
 
Average
 
Borrowings from
 
Loans to
 
Authorized
Borrowings
 
Loans
 
Borrowings
 
Loans
 
AEP as of
 
AEP as of
 
Short-term
from AEP
 
to AEP
 
from AEP
 
to AEP
 
June 30, 2017
 
June 30, 2017
 
Borrowing Limit
(in millions)
$
1.1

 
$
78.9

 
$
1.1

 
$
34.8

 
$
1.1

 
$
22.2

 
$
75.0



The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:
 
 
Six Months Ended June 30,
 
 
2017
 
2016
Maximum Interest Rate
 
1.44
%
 
0.84
%
Minimum Interest Rate
 
0.92
%
 
0.69
%


The average interest rates for funds borrowed from and loaned to the Utility Money Pool are summarized for all Registrant Subsidiaries in the following table:
 
 
Average Interest Rate
 
Average Interest Rate
 
 
for Funds Borrowed
 
for Funds Loaned
 
 
from the Utility Money Pool for
 
to the Utility Money Pool for
 
 
Six Months Ended June 30,
 
Six Months Ended June 30,
Company
 
2017
 
2016
 
2017
 
2016
AEPTCo
 
1.25
%
 
0.76
%
 
0.99
%
 
0.74
%
APCo
 
1.17
%
 
0.75
%
 
1.22
%
 
0.75
%
I&M
 
1.20
%
 
0.72
%
 
1.18
%
 
0.75
%
OPCo
 
1.31
%
 
0.79
%
 
0.98
%
 
0.74
%
PSO
 
1.23
%
 
0.76
%
 
—
%
 
0.73
%
SWEPCo
 
1.20
%
 
0.75
%
 
0.98
%
 
—
%


Maximum, minimum and average interest rates for funds loaned to the Nonutility Money Pool are summarized for Mutual Energy SWEPCo, LLC in the following table:
 
 
Maximum
 
Minimum
 
Average
 
 
Interest Rate
 
Interest Rate
 
Interest Rate
Six Months
 
for Funds Loaned
 
for Funds Loaned
 
for Funds Loaned
Ended
 
to the Nonutility
 
 to the Nonutility
 
to the Nonutility
June 30,
Money Pool
 
Money Pool
 
Money Pool
2017
 
1.44
%
 
—
%
 
1.17
%
2016
 
0.84
%
 
0.69
%
 
0.75
%


AEPTCo’s maximum, minimum and average interest rates for funds either borrowed from or loaned to AEP are summarized in the following table:
 
 
Maximum
 
Minimum
 
Maximum
 
Minimum
 
Average
 
Average
 
 
Interest Rate
 
Interest Rate
 
Interest Rate
 
Interest Rate
 
Interest Rate
 
Interest Rate
Six Months
 
for Funds
 
for Funds
 
for Funds
 
for Funds
 
for Funds
 
for Funds
Ended
 
Borrowed
 
Borrowed
 
Loaned
 
Loaned
 
Borrowed
 
Loaned
June 30,
 
from AEP
 
from AEP
to AEP
 
to AEP
 
from AEP
 
to AEP
2017
 
1.44
%
 
0.92
%
 
1.44
%
 
0.92
%
 
1.18
%
 
1.21
%
2016
 
0.84
%
 
0.69
%
 
0.84
%
 
0.69
%
 
0.75
%
 
0.75
%


Short-term Debt (Applies to AEP and SWEPCo)

Outstanding short-term debt was as follows:
 
 
 
 
June 30, 2017
 
December 31, 2016
Company
 
Type of Debt
 
Outstanding
Amount
 
Interest
Rate (a)
 
Outstanding
Amount
 
Interest
Rate (a)
 
 
 
 
(in millions)
 
 
 
(in millions)
 
 
AEP
 
Securitized Debt for Receivables (b)
 
$
519.0

 
1.09
%
 
$
673.0

 
0.70
%
AEP
 
Commercial Paper
 
1,324.0

 
1.43
%
 
1,040.0

 
1.02
%
SWEPCo
 
Notes Payable
 
8.7

 
2.77
%
 
—

 
—
%
 
 
Total Short-term Debt
 
$
1,851.7

 
 

 
$
1,713.0

 
 


(a)
Weighted average rate.
(b)
Amount of securitized debt for receivables as accounted for under the “Transfers and Servicing” accounting guidance.

Credit Facilities

For a discussion of credit facilities, see “Letters of Credit” section of Note 5.

Securitized Accounts Receivables – AEP Credit (Applies to AEP)

AEP Credit has a receivables securitization agreement with bank conduits.  Under the securitization agreement, AEP Credit receives financing from the bank conduits for the interest in the receivables AEP Credit acquires from affiliated utility subsidiaries.  These securitized transactions allow AEP Credit to repay its outstanding debt obligations, continue to purchase the operating companies’ receivables and accelerate AEP Credit’s cash collections.

AEP Credit’s receivables securitization agreement provides a commitment of $750 million from bank conduits to purchase receivables and expires in June 2019.

Accounts receivable information for AEP Credit is as follows:
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
(dollars in millions)
Effective Interest Rates on Securitization of Accounts Receivable
 
1.17
%
 
0.63
%
 
1.09
%
 
0.61
%
Net Uncollectible Accounts Receivable Written Off
 
$
5.3

 
$
4.1

 
$
11.2

 
$
9.8


 
 
June 30, 2017
 
December 31, 2016
 
 
(in millions)
Accounts Receivable Retained Interest and Pledged as Collateral Less Uncollectible Accounts
 
$
921.7

 
$
945.0

Short-term – Securitized Debt of Receivables
 
519.0

 
673.0

Delinquent Securitized Accounts Receivable
 
44.3

 
42.7

Bad Debt Reserves Related to Securitization
 
27.7

 
27.7

Unbilled Receivables Related to Securitization
 
347.9

 
322.1



AEP Credit’s delinquent customer accounts receivable represent accounts greater than 30 days past due.

Securitized Accounts Receivables – AEP Credit (Applies to Registrant Subsidiaries, except AEPTCo)

Under this sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit’s financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary’s receivables.  APCo does not have regulatory authority to sell its West Virginia accounts receivable.  The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries’ statements of income.  The Registrant Subsidiaries manage and service their customer accounts receivable, which are sold to AEP Credit. AEP Credit securitizes the eligible receivables for the operating companies and retains the remainder.

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary was as follows:
Company
 
June 30, 2017
 
December 31, 2016
 
 
(in millions)
APCo
 
$
127.5

 
$
142.0

I&M
 
145.6

 
136.7

OPCo
 
322.4

 
388.3

PSO
 
136.1

 
110.4

SWEPCo
 
163.5

 
130.9



The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Company
 
2017
 
2016
 
2017
 
2016
 
 
(in millions)
APCo
 
$
1.3

 
$
2.0

 
$
2.7

 
$
3.8

I&M
 
1.6

 
1.7

 
3.1

 
3.6

OPCo
 
4.7

 
7.4

 
10.4

 
15.3

PSO
 
1.7

 
1.5

 
3.2

 
2.9

SWEPCo
 
1.8

 
1.7

 
3.4

 
3.2



The Registrant Subsidiaries’ proceeds on the sale of receivables to AEP Credit were:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Company
 
2017
 
2016
 
2017
 
2016
 
 
(in millions)
APCo
 
$
324.2

 
$
325.5

 
$
693.9

 
$
709.9

I&M
 
390.7

 
384.1

 
809.0

 
772.2

OPCo
 
493.1

 
613.7

 
1,125.4

 
1,260.3

PSO
 
328.7

 
309.2

 
615.5

 
581.3

SWEPCo
 
404.6

 
387.4

 
745.8

 
723.5
Indiana Michigan Power Co [Member]  
Financing Activities
FINANCING ACTIVITIES

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

Long-term Debt Outstanding (Applies to AEP)

The following table details long-term debt outstanding:
Type of Debt
 
June 30, 2017
 
December 31, 2016
 
 
 
(in millions)
 
Senior Unsecured Notes
 
$
14,728.9

 
$
14,761.0

(b)
Pollution Control Bonds
 
1,611.1

 
1,725.1

 
Notes Payable
 
259.7

 
326.9

 
Securitization Bonds
 
1,555.8

 
1,705.0

 
Spent Nuclear Fuel Obligation (a)
 
267.1

 
266.3

 
Other Long-term Debt
 
1,129.3

 
1,606.9

 
Total Long-term Debt Outstanding
 
19,551.9

 
20,391.2

(b)
Long-term Debt Due Within One Year
 
2,755.0

 
3,013.4

(b)
Long-term Debt
 
$
16,796.9

 
$
17,377.8

(b)


(a)
Pursuant to the Nuclear Waste Policy Act of 1982, I&M, a nuclear licensee, has an obligation to the United States Department of Energy for spent nuclear fuel disposal.  The obligation includes a one-time fee for nuclear fuel consumed prior to April 7, 1983.  Trust fund assets related to this obligation were $310 million and $311 million as of June 30, 2017 and December 31, 2016, respectively, and are included in Spent Nuclear Fuel and Decommissioning Trusts on the balance sheets.
(b)
Amounts include debt related to the Lawrenceburg Plant that has been classified as Liabilities Held for Sale on the balance sheet. See “Gavin, Waterford, Darby and Lawrenceburg Plants (Generation & Marketing Segment)” section of Note 6 for additional information.

Long-term Debt Activity

Long-term debt and other securities issued, retired and principal payments made during the first six months of 2017 are shown in the tables below:
Company
 
Type of Debt
 
Principal Amount (a)
 
Interest Rate
 
Due Date
Issuances:
 
 
 
(in millions)
 
(%)
 
 
APCo
 
Senior Unsecured Notes
 
$
325.0

 
3.30
 
2027
I&M
 
Pollution Control Bonds
 
25.0

 
Variable
 
2019
I&M
 
Pollution Control Bonds
 
40.0

 
2.05
 
2021
I&M
 
Pollution Control Bonds
 
52.0

 
Variable
 
2021
I&M
 
Senior Unsecured Notes
 
300.0

 
3.75
 
2047
SWEPCo
 
Other Long-term Debt
 
115.0

 
Variable
 
2020
 
 
 
 


 

 

Non-Registrant:
 
 
 


 

 

KPCo
 
Pollution Control Bonds
 
65.0

 
2.00
 
2020
Transource Missouri
 
Other Long-term Debt
 
7.0

 
Variable
 
2018
Transource Energy
 
Other Long-term Debt
 
132.1

 
Variable
 
2020
Total Issuances
 
 
 
$
1,061.1

 

 


(a)
Amounts indicated on the statements of cash flows are net of issuance costs and premium or discount and will not tie to the issuance amounts.
Company
 
Type of Debt
 
 Principal Amount Paid
 
Interest Rate
 
Due Date
Retirements and Principal Payments:
 
 
 
(in millions)
 
(%)
 
 
APCo
 
Senior Unsecured Notes
 
$
250.0

 
5.00
 
2017
APCo
 
Securitization Bonds
 
11.5

 
2.008
 
2024
APCo
 
Pollution Control Bonds
 
104.4

 
Variable
 
2017
I&M
 
Notes Payable
 
3.3

 
Variable
 
2017
I&M
 
Pollution Control Bonds
 
25.0

 
Variable
 
2017
I&M
 
Notes Payable
 
14.9

 
Variable
 
2019
I&M
 
Notes Payable
 
15.8

 
Variable
 
2019
I&M
 
Notes Payable
 
15.9

 
Variable
 
2020
I&M
 
Pollution Control Bonds
 
52.0

 
Variable
 
2017
I&M
 
Notes Payable
 
15.7

 
Variable
 
2021
I&M
 
Other Long-term Debt
 
0.7

 
6.00
 
2025
I&M
 
Pollution Control Bonds
 
50.0

 
Variable
 
2025
OPCo
 
Securitization Bonds
 
22.5

 
0.958
 
2018
PSO
 
Other Long-term Debt
 
0.2

 
3.00
 
2027
SWEPCo
 
Senior Unsecured Notes
 
250.0

 
5.55
 
2017
SWEPCo
 
Other Long-term Debt
 
100.0

 
Variable
 
2017
SWEPCo
 
Other Long-term Debt
 
0.1

 
3.50
 
2023
SWEPCo
 
Other Long-term Debt
 
0.1

 
4.28
 
2023
SWEPCo
 
Notes Payable
 
1.6

 
4.58
 
2032
 
 
 
 
 
 
 
 
 
Non-Registrant:
 
 
 
 
 
 
 
 
AEGCo
 
Senior Unsecured Notes
 
152.7

 
6.33
 
2037
AGR
 
Other Long-term Debt
 
500.0

 
Variable
 
2017
KPCo
 
Pollution Control Bonds
 
65.0

 
Variable
 
2017
TCC
 
Securitization Bonds
 
27.2

 
0.88
 
2017
TCC
 
Securitization Bonds
 
89.9

 
5.17
 
2018
Transource Missouri
 
Other Long-term Debt
 
130.8

 
Variable
 
2018
Total Retirements and Principal Payments
 
 
 
$
1,899.3

 
 
 
 


In July 2017, I&M retired $5 million of Notes Payable related to DCC Fuel.

In July 2017, OPCo retired $24 million of Securitization Bonds.

In July 2017, AEP Texas retired $71 million of Securitization Bonds.

As of June 30, 2017, trustees held, on behalf of AEP, $728 million of their reacquired Pollution Control Bonds. Of this total, $104 million, $50 million and $345 million related to APCo, I&M and OPCo, respectively.

Debt Covenants (Applies to AEP and AEPTCo)

Covenants in AEPTCo’s note purchase agreements and indenture also limit the amount of contractually-defined priority debt (which includes a further sub-limit of $50 million of secured debt) to 10% of consolidated tangible net assets. The method for calculating the consolidated tangible net assets is contractually defined in the note purchase agreements.
Dividend Restrictions

Utility Subsidiaries’ Restrictions

Parent depends on its utility subsidiaries to pay dividends to shareholders. AEP utility subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the subsidiaries to transfer funds to Parent in the form of dividends.

All of the dividends declared by AEP’s utility subsidiaries that provide transmission or local distribution services are subject to a Federal Power Act restriction that prohibits the payment of dividends out of capital accounts without regulatory approval; payment of dividends is allowed out of retained earnings only. Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generation plants. Because of their ownership of such plants, this reserve applies to AGR, APCo and I&M.

Certain AEP subsidiaries have credit agreements that contain a covenant that limits their debt to capitalization ratio to 67.5%. The payment of cash dividends indirectly results in an increase in the percentage of debt to total capitalization of the AEP subsidiary distributing the dividend. The method for calculating outstanding debt and capitalization is contractually defined in the credit agreements.

As of June 30, 2017, the Federal Power Act restriction does not limit the ability of the AEP subsidiaries to pay dividends out of retained earnings.

Parent Restrictions (Applies to AEP)

The holders of AEP’s common stock are entitled to receive the dividends declared by the Board of Directors provided funds are legally available for such dividends.  Parent’s income primarily derives from common stock equity in the earnings of its utility subsidiaries.

Pursuant to the leverage restrictions in credit agreements, AEP must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%.  The payment of cash dividends indirectly results in an increase in the percentage of debt to total capitalization of the company distributing the dividend.  The method for calculating outstanding debt and capitalization is contractually defined in the credit agreements.

Corporate Borrowing Program - AEP System (Applies to Registrant Subsidiaries)

The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of AEP’s subsidiaries.  The corporate borrowing program includes a Utility Money Pool, which funds AEP’s utility subsidiaries, and a Nonutility Money Pool, which funds certain AEP nonutility subsidiaries.  The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with the FERC.  The amounts of outstanding loans to (borrowings from) the Utility Money Pool as of June 30, 2017 and December 31, 2016 are included in Advances to Affiliates and Advances from Affiliates, respectively, on each of the Registrant Subsidiaries’ balance sheets.  The Utility Money Pool participants’ money pool activity and their corresponding authorized borrowing limits for the six months ended June 30, 2017 are described in the following table:
 
 
Maximum
 
 
 
Average
 
 
 
Net
 
 
 
 
 
Borrowings
 
Maximum
 
Borrowings
 
Average
 
Borrowings from
 
Authorized
 
 
 
from the
 
Loans to the
 
from the
 
Loans to the
 
the Utility Money
 
Short-term
 
 
 
Utility
 
Utility
 
Utility
 
Utility
 
Pool as of
 
Borrowing
 
Company
 
Money Pool
 
Money Pool
 
Money Pool
 
Money Pool
 
June 30, 2017
 
Limit
 
 
 
(in millions)
 
AEPTCo
 
$
333.3

 
$
52.9

 
$
170.7

 
$
12.3

 
$
246.3

 
$
795.0

(a)
APCo
 
231.5

 
160.7

 
179.1

 
36.4

 
100.9

 
600.0

 
I&M
 
367.4

 
12.6

 
258.6

 
12.6

 
30.8

 
500.0

 
OPCo
 
243.7

 
56.2

 
91.7

 
27.9

 
190.5

 
400.0

 
PSO
 
185.2

 
—

 
123.6

 
—

 
141.4

 
300.0

 
SWEPCo
 
187.5

 
178.6

 
132.4

 
169.5

 
58.6

 
350.0

 


(a)
Amount represents the combined authorized short-term borrowing limit the State Transcos have through their agreements with the FERC or state regulatory commissions.

The activity in the above table does not include short-term lending activity of SWEPCo’s wholly-owned subsidiary, Mutual Energy SWEPCo, LLC, which is a participant in the Nonutility Money Pool. The amounts of outstanding loans to the Nonutility Money Pool as of June 30, 2017 and December 31, 2016 are included in Advances to Affiliates on SWEPCo’s balance sheets. For the six months ended June 30, 2017, Mutual Energy SWEPCo, LLC had the following activity in the Nonutility Money Pool:
Maximum
 
Average
 
Loans
Loans
 
Loans
 
to the Nonutility
to the Nonutility
 
to the Nonutility
 
Money Pool as of
Money Pool
 
Money Pool
 
June 30, 2017
(in millions)
$
2.0

 
$
2.0

 
$
2.0



AEP has a direct financing relationship with AEPTCo to meet their short-term borrowing needs. The amounts of outstanding loans to (borrowings from) AEP as of June 30, 2017 and December 31, 2016 are included in Advances to Affiliates and Advances from Affiliates, respectively, on AEPTCo’s balance sheets. AEPTCo’s direct borrowing and lending activity with AEP for the six months ended June 30, 2017 is described in the following table:
Maximum
 
Maximum
 
Average
 
Average
 
Borrowings from
 
Loans to
 
Authorized
Borrowings
 
Loans
 
Borrowings
 
Loans
 
AEP as of
 
AEP as of
 
Short-term
from AEP
 
to AEP
 
from AEP
 
to AEP
 
June 30, 2017
 
June 30, 2017
 
Borrowing Limit
(in millions)
$
1.1

 
$
78.9

 
$
1.1

 
$
34.8

 
$
1.1

 
$
22.2

 
$
75.0



The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:
 
 
Six Months Ended June 30,
 
 
2017
 
2016
Maximum Interest Rate
 
1.44
%
 
0.84
%
Minimum Interest Rate
 
0.92
%
 
0.69
%


The average interest rates for funds borrowed from and loaned to the Utility Money Pool are summarized for all Registrant Subsidiaries in the following table:
 
 
Average Interest Rate
 
Average Interest Rate
 
 
for Funds Borrowed
 
for Funds Loaned
 
 
from the Utility Money Pool for
 
to the Utility Money Pool for
 
 
Six Months Ended June 30,
 
Six Months Ended June 30,
Company
 
2017
 
2016
 
2017
 
2016
AEPTCo
 
1.25
%
 
0.76
%
 
0.99
%
 
0.74
%
APCo
 
1.17
%
 
0.75
%
 
1.22
%
 
0.75
%
I&M
 
1.20
%
 
0.72
%
 
1.18
%
 
0.75
%
OPCo
 
1.31
%
 
0.79
%
 
0.98
%
 
0.74
%
PSO
 
1.23
%
 
0.76
%
 
—
%
 
0.73
%
SWEPCo
 
1.20
%
 
0.75
%
 
0.98
%
 
—
%


Maximum, minimum and average interest rates for funds loaned to the Nonutility Money Pool are summarized for Mutual Energy SWEPCo, LLC in the following table:
 
 
Maximum
 
Minimum
 
Average
 
 
Interest Rate
 
Interest Rate
 
Interest Rate
Six Months
 
for Funds Loaned
 
for Funds Loaned
 
for Funds Loaned
Ended
 
to the Nonutility
 
 to the Nonutility
 
to the Nonutility
June 30,
Money Pool
 
Money Pool
 
Money Pool
2017
 
1.44
%
 
—
%
 
1.17
%
2016
 
0.84
%
 
0.69
%
 
0.75
%


AEPTCo’s maximum, minimum and average interest rates for funds either borrowed from or loaned to AEP are summarized in the following table:
 
 
Maximum
 
Minimum
 
Maximum
 
Minimum
 
Average
 
Average
 
 
Interest Rate
 
Interest Rate
 
Interest Rate
 
Interest Rate
 
Interest Rate
 
Interest Rate
Six Months
 
for Funds
 
for Funds
 
for Funds
 
for Funds
 
for Funds
 
for Funds
Ended
 
Borrowed
 
Borrowed
 
Loaned
 
Loaned
 
Borrowed
 
Loaned
June 30,
 
from AEP
 
from AEP
to AEP
 
to AEP
 
from AEP
 
to AEP
2017
 
1.44
%
 
0.92
%
 
1.44
%
 
0.92
%
 
1.18
%
 
1.21
%
2016
 
0.84
%
 
0.69
%
 
0.84
%
 
0.69
%
 
0.75
%
 
0.75
%


Short-term Debt (Applies to AEP and SWEPCo)

Outstanding short-term debt was as follows:
 
 
 
 
June 30, 2017
 
December 31, 2016
Company
 
Type of Debt
 
Outstanding
Amount
 
Interest
Rate (a)
 
Outstanding
Amount
 
Interest
Rate (a)
 
 
 
 
(in millions)
 
 
 
(in millions)
 
 
AEP
 
Securitized Debt for Receivables (b)
 
$
519.0

 
1.09
%
 
$
673.0

 
0.70
%
AEP
 
Commercial Paper
 
1,324.0

 
1.43
%
 
1,040.0

 
1.02
%
SWEPCo
 
Notes Payable
 
8.7

 
2.77
%
 
—

 
—
%
 
 
Total Short-term Debt
 
$
1,851.7

 
 

 
$
1,713.0

 
 


(a)
Weighted average rate.
(b)
Amount of securitized debt for receivables as accounted for under the “Transfers and Servicing” accounting guidance.

Credit Facilities

For a discussion of credit facilities, see “Letters of Credit” section of Note 5.

Securitized Accounts Receivables – AEP Credit (Applies to AEP)

AEP Credit has a receivables securitization agreement with bank conduits.  Under the securitization agreement, AEP Credit receives financing from the bank conduits for the interest in the receivables AEP Credit acquires from affiliated utility subsidiaries.  These securitized transactions allow AEP Credit to repay its outstanding debt obligations, continue to purchase the operating companies’ receivables and accelerate AEP Credit’s cash collections.

AEP Credit’s receivables securitization agreement provides a commitment of $750 million from bank conduits to purchase receivables and expires in June 2019.

Accounts receivable information for AEP Credit is as follows:
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
(dollars in millions)
Effective Interest Rates on Securitization of Accounts Receivable
 
1.17
%
 
0.63
%
 
1.09
%
 
0.61
%
Net Uncollectible Accounts Receivable Written Off
 
$
5.3

 
$
4.1

 
$
11.2

 
$
9.8


 
 
June 30, 2017
 
December 31, 2016
 
 
(in millions)
Accounts Receivable Retained Interest and Pledged as Collateral Less Uncollectible Accounts
 
$
921.7

 
$
945.0

Short-term – Securitized Debt of Receivables
 
519.0

 
673.0

Delinquent Securitized Accounts Receivable
 
44.3

 
42.7

Bad Debt Reserves Related to Securitization
 
27.7

 
27.7

Unbilled Receivables Related to Securitization
 
347.9

 
322.1



AEP Credit’s delinquent customer accounts receivable represent accounts greater than 30 days past due.

Securitized Accounts Receivables – AEP Credit (Applies to Registrant Subsidiaries, except AEPTCo)

Under this sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit’s financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary’s receivables.  APCo does not have regulatory authority to sell its West Virginia accounts receivable.  The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries’ statements of income.  The Registrant Subsidiaries manage and service their customer accounts receivable, which are sold to AEP Credit. AEP Credit securitizes the eligible receivables for the operating companies and retains the remainder.

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary was as follows:
Company
 
June 30, 2017
 
December 31, 2016
 
 
(in millions)
APCo
 
$
127.5

 
$
142.0

I&M
 
145.6

 
136.7

OPCo
 
322.4

 
388.3

PSO
 
136.1

 
110.4

SWEPCo
 
163.5

 
130.9



The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Company
 
2017
 
2016
 
2017
 
2016
 
 
(in millions)
APCo
 
$
1.3

 
$
2.0

 
$
2.7

 
$
3.8

I&M
 
1.6

 
1.7

 
3.1

 
3.6

OPCo
 
4.7

 
7.4

 
10.4

 
15.3

PSO
 
1.7

 
1.5

 
3.2

 
2.9

SWEPCo
 
1.8

 
1.7

 
3.4

 
3.2



The Registrant Subsidiaries’ proceeds on the sale of receivables to AEP Credit were:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Company
 
2017
 
2016
 
2017
 
2016
 
 
(in millions)
APCo
 
$
324.2

 
$
325.5

 
$
693.9

 
$
709.9

I&M
 
390.7

 
384.1

 
809.0

 
772.2

OPCo
 
493.1

 
613.7

 
1,125.4

 
1,260.3

PSO
 
328.7

 
309.2

 
615.5

 
581.3

SWEPCo
 
404.6

 
387.4

 
745.8

 
723.5
Ohio Power Co [Member]  
Financing Activities
FINANCING ACTIVITIES

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

Long-term Debt Outstanding (Applies to AEP)

The following table details long-term debt outstanding:
Type of Debt
 
June 30, 2017
 
December 31, 2016
 
 
 
(in millions)
 
Senior Unsecured Notes
 
$
14,728.9

 
$
14,761.0

(b)
Pollution Control Bonds
 
1,611.1

 
1,725.1

 
Notes Payable
 
259.7

 
326.9

 
Securitization Bonds
 
1,555.8

 
1,705.0

 
Spent Nuclear Fuel Obligation (a)
 
267.1

 
266.3

 
Other Long-term Debt
 
1,129.3

 
1,606.9

 
Total Long-term Debt Outstanding
 
19,551.9

 
20,391.2

(b)
Long-term Debt Due Within One Year
 
2,755.0

 
3,013.4

(b)
Long-term Debt
 
$
16,796.9

 
$
17,377.8

(b)


(a)
Pursuant to the Nuclear Waste Policy Act of 1982, I&M, a nuclear licensee, has an obligation to the United States Department of Energy for spent nuclear fuel disposal.  The obligation includes a one-time fee for nuclear fuel consumed prior to April 7, 1983.  Trust fund assets related to this obligation were $310 million and $311 million as of June 30, 2017 and December 31, 2016, respectively, and are included in Spent Nuclear Fuel and Decommissioning Trusts on the balance sheets.
(b)
Amounts include debt related to the Lawrenceburg Plant that has been classified as Liabilities Held for Sale on the balance sheet. See “Gavin, Waterford, Darby and Lawrenceburg Plants (Generation & Marketing Segment)” section of Note 6 for additional information.

Long-term Debt Activity

Long-term debt and other securities issued, retired and principal payments made during the first six months of 2017 are shown in the tables below:
Company
 
Type of Debt
 
Principal Amount (a)
 
Interest Rate
 
Due Date
Issuances:
 
 
 
(in millions)
 
(%)
 
 
APCo
 
Senior Unsecured Notes
 
$
325.0

 
3.30
 
2027
I&M
 
Pollution Control Bonds
 
25.0

 
Variable
 
2019
I&M
 
Pollution Control Bonds
 
40.0

 
2.05
 
2021
I&M
 
Pollution Control Bonds
 
52.0

 
Variable
 
2021
I&M
 
Senior Unsecured Notes
 
300.0

 
3.75
 
2047
SWEPCo
 
Other Long-term Debt
 
115.0

 
Variable
 
2020
 
 
 
 


 

 

Non-Registrant:
 
 
 


 

 

KPCo
 
Pollution Control Bonds
 
65.0

 
2.00
 
2020
Transource Missouri
 
Other Long-term Debt
 
7.0

 
Variable
 
2018
Transource Energy
 
Other Long-term Debt
 
132.1

 
Variable
 
2020
Total Issuances
 
 
 
$
1,061.1

 

 


(a)
Amounts indicated on the statements of cash flows are net of issuance costs and premium or discount and will not tie to the issuance amounts.
Company
 
Type of Debt
 
 Principal Amount Paid
 
Interest Rate
 
Due Date
Retirements and Principal Payments:
 
 
 
(in millions)
 
(%)
 
 
APCo
 
Senior Unsecured Notes
 
$
250.0

 
5.00
 
2017
APCo
 
Securitization Bonds
 
11.5

 
2.008
 
2024
APCo
 
Pollution Control Bonds
 
104.4

 
Variable
 
2017
I&M
 
Notes Payable
 
3.3

 
Variable
 
2017
I&M
 
Pollution Control Bonds
 
25.0

 
Variable
 
2017
I&M
 
Notes Payable
 
14.9

 
Variable
 
2019
I&M
 
Notes Payable
 
15.8

 
Variable
 
2019
I&M
 
Notes Payable
 
15.9

 
Variable
 
2020
I&M
 
Pollution Control Bonds
 
52.0

 
Variable
 
2017
I&M
 
Notes Payable
 
15.7

 
Variable
 
2021
I&M
 
Other Long-term Debt
 
0.7

 
6.00
 
2025
I&M
 
Pollution Control Bonds
 
50.0

 
Variable
 
2025
OPCo
 
Securitization Bonds
 
22.5

 
0.958
 
2018
PSO
 
Other Long-term Debt
 
0.2

 
3.00
 
2027
SWEPCo
 
Senior Unsecured Notes
 
250.0

 
5.55
 
2017
SWEPCo
 
Other Long-term Debt
 
100.0

 
Variable
 
2017
SWEPCo
 
Other Long-term Debt
 
0.1

 
3.50
 
2023
SWEPCo
 
Other Long-term Debt
 
0.1

 
4.28
 
2023
SWEPCo
 
Notes Payable
 
1.6

 
4.58
 
2032
 
 
 
 
 
 
 
 
 
Non-Registrant:
 
 
 
 
 
 
 
 
AEGCo
 
Senior Unsecured Notes
 
152.7

 
6.33
 
2037
AGR
 
Other Long-term Debt
 
500.0

 
Variable
 
2017
KPCo
 
Pollution Control Bonds
 
65.0

 
Variable
 
2017
TCC
 
Securitization Bonds
 
27.2

 
0.88
 
2017
TCC
 
Securitization Bonds
 
89.9

 
5.17
 
2018
Transource Missouri
 
Other Long-term Debt
 
130.8

 
Variable
 
2018
Total Retirements and Principal Payments
 
 
 
$
1,899.3

 
 
 
 


In July 2017, I&M retired $5 million of Notes Payable related to DCC Fuel.

In July 2017, OPCo retired $24 million of Securitization Bonds.

In July 2017, AEP Texas retired $71 million of Securitization Bonds.

As of June 30, 2017, trustees held, on behalf of AEP, $728 million of their reacquired Pollution Control Bonds. Of this total, $104 million, $50 million and $345 million related to APCo, I&M and OPCo, respectively.

Debt Covenants (Applies to AEP and AEPTCo)

Covenants in AEPTCo’s note purchase agreements and indenture also limit the amount of contractually-defined priority debt (which includes a further sub-limit of $50 million of secured debt) to 10% of consolidated tangible net assets. The method for calculating the consolidated tangible net assets is contractually defined in the note purchase agreements.
Dividend Restrictions

Utility Subsidiaries’ Restrictions

Parent depends on its utility subsidiaries to pay dividends to shareholders. AEP utility subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the subsidiaries to transfer funds to Parent in the form of dividends.

All of the dividends declared by AEP’s utility subsidiaries that provide transmission or local distribution services are subject to a Federal Power Act restriction that prohibits the payment of dividends out of capital accounts without regulatory approval; payment of dividends is allowed out of retained earnings only. Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generation plants. Because of their ownership of such plants, this reserve applies to AGR, APCo and I&M.

Certain AEP subsidiaries have credit agreements that contain a covenant that limits their debt to capitalization ratio to 67.5%. The payment of cash dividends indirectly results in an increase in the percentage of debt to total capitalization of the AEP subsidiary distributing the dividend. The method for calculating outstanding debt and capitalization is contractually defined in the credit agreements.

As of June 30, 2017, the Federal Power Act restriction does not limit the ability of the AEP subsidiaries to pay dividends out of retained earnings.

Parent Restrictions (Applies to AEP)

The holders of AEP’s common stock are entitled to receive the dividends declared by the Board of Directors provided funds are legally available for such dividends.  Parent’s income primarily derives from common stock equity in the earnings of its utility subsidiaries.

Pursuant to the leverage restrictions in credit agreements, AEP must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%.  The payment of cash dividends indirectly results in an increase in the percentage of debt to total capitalization of the company distributing the dividend.  The method for calculating outstanding debt and capitalization is contractually defined in the credit agreements.

Corporate Borrowing Program - AEP System (Applies to Registrant Subsidiaries)

The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of AEP’s subsidiaries.  The corporate borrowing program includes a Utility Money Pool, which funds AEP’s utility subsidiaries, and a Nonutility Money Pool, which funds certain AEP nonutility subsidiaries.  The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with the FERC.  The amounts of outstanding loans to (borrowings from) the Utility Money Pool as of June 30, 2017 and December 31, 2016 are included in Advances to Affiliates and Advances from Affiliates, respectively, on each of the Registrant Subsidiaries’ balance sheets.  The Utility Money Pool participants’ money pool activity and their corresponding authorized borrowing limits for the six months ended June 30, 2017 are described in the following table:
 
 
Maximum
 
 
 
Average
 
 
 
Net
 
 
 
 
 
Borrowings
 
Maximum
 
Borrowings
 
Average
 
Borrowings from
 
Authorized
 
 
 
from the
 
Loans to the
 
from the
 
Loans to the
 
the Utility Money
 
Short-term
 
 
 
Utility
 
Utility
 
Utility
 
Utility
 
Pool as of
 
Borrowing
 
Company
 
Money Pool
 
Money Pool
 
Money Pool
 
Money Pool
 
June 30, 2017
 
Limit
 
 
 
(in millions)
 
AEPTCo
 
$
333.3

 
$
52.9

 
$
170.7

 
$
12.3

 
$
246.3

 
$
795.0

(a)
APCo
 
231.5

 
160.7

 
179.1

 
36.4

 
100.9

 
600.0

 
I&M
 
367.4

 
12.6

 
258.6

 
12.6

 
30.8

 
500.0

 
OPCo
 
243.7

 
56.2

 
91.7

 
27.9

 
190.5

 
400.0

 
PSO
 
185.2

 
—

 
123.6

 
—

 
141.4

 
300.0

 
SWEPCo
 
187.5

 
178.6

 
132.4

 
169.5

 
58.6

 
350.0

 


(a)
Amount represents the combined authorized short-term borrowing limit the State Transcos have through their agreements with the FERC or state regulatory commissions.

The activity in the above table does not include short-term lending activity of SWEPCo’s wholly-owned subsidiary, Mutual Energy SWEPCo, LLC, which is a participant in the Nonutility Money Pool. The amounts of outstanding loans to the Nonutility Money Pool as of June 30, 2017 and December 31, 2016 are included in Advances to Affiliates on SWEPCo’s balance sheets. For the six months ended June 30, 2017, Mutual Energy SWEPCo, LLC had the following activity in the Nonutility Money Pool:
Maximum
 
Average
 
Loans
Loans
 
Loans
 
to the Nonutility
to the Nonutility
 
to the Nonutility
 
Money Pool as of
Money Pool
 
Money Pool
 
June 30, 2017
(in millions)
$
2.0

 
$
2.0

 
$
2.0



AEP has a direct financing relationship with AEPTCo to meet their short-term borrowing needs. The amounts of outstanding loans to (borrowings from) AEP as of June 30, 2017 and December 31, 2016 are included in Advances to Affiliates and Advances from Affiliates, respectively, on AEPTCo’s balance sheets. AEPTCo’s direct borrowing and lending activity with AEP for the six months ended June 30, 2017 is described in the following table:
Maximum
 
Maximum
 
Average
 
Average
 
Borrowings from
 
Loans to
 
Authorized
Borrowings
 
Loans
 
Borrowings
 
Loans
 
AEP as of
 
AEP as of
 
Short-term
from AEP
 
to AEP
 
from AEP
 
to AEP
 
June 30, 2017
 
June 30, 2017
 
Borrowing Limit
(in millions)
$
1.1

 
$
78.9

 
$
1.1

 
$
34.8

 
$
1.1

 
$
22.2

 
$
75.0



The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:
 
 
Six Months Ended June 30,
 
 
2017
 
2016
Maximum Interest Rate
 
1.44
%
 
0.84
%
Minimum Interest Rate
 
0.92
%
 
0.69
%


The average interest rates for funds borrowed from and loaned to the Utility Money Pool are summarized for all Registrant Subsidiaries in the following table:
 
 
Average Interest Rate
 
Average Interest Rate
 
 
for Funds Borrowed
 
for Funds Loaned
 
 
from the Utility Money Pool for
 
to the Utility Money Pool for
 
 
Six Months Ended June 30,
 
Six Months Ended June 30,
Company
 
2017
 
2016
 
2017
 
2016
AEPTCo
 
1.25
%
 
0.76
%
 
0.99
%
 
0.74
%
APCo
 
1.17
%
 
0.75
%
 
1.22
%
 
0.75
%
I&M
 
1.20
%
 
0.72
%
 
1.18
%
 
0.75
%
OPCo
 
1.31
%
 
0.79
%
 
0.98
%
 
0.74
%
PSO
 
1.23
%
 
0.76
%
 
—
%
 
0.73
%
SWEPCo
 
1.20
%
 
0.75
%
 
0.98
%
 
—
%


Maximum, minimum and average interest rates for funds loaned to the Nonutility Money Pool are summarized for Mutual Energy SWEPCo, LLC in the following table:
 
 
Maximum
 
Minimum
 
Average
 
 
Interest Rate
 
Interest Rate
 
Interest Rate
Six Months
 
for Funds Loaned
 
for Funds Loaned
 
for Funds Loaned
Ended
 
to the Nonutility
 
 to the Nonutility
 
to the Nonutility
June 30,
Money Pool
 
Money Pool
 
Money Pool
2017
 
1.44
%
 
—
%
 
1.17
%
2016
 
0.84
%
 
0.69
%
 
0.75
%


AEPTCo’s maximum, minimum and average interest rates for funds either borrowed from or loaned to AEP are summarized in the following table:
 
 
Maximum
 
Minimum
 
Maximum
 
Minimum
 
Average
 
Average
 
 
Interest Rate
 
Interest Rate
 
Interest Rate
 
Interest Rate
 
Interest Rate
 
Interest Rate
Six Months
 
for Funds
 
for Funds
 
for Funds
 
for Funds
 
for Funds
 
for Funds
Ended
 
Borrowed
 
Borrowed
 
Loaned
 
Loaned
 
Borrowed
 
Loaned
June 30,
 
from AEP
 
from AEP
to AEP
 
to AEP
 
from AEP
 
to AEP
2017
 
1.44
%
 
0.92
%
 
1.44
%
 
0.92
%
 
1.18
%
 
1.21
%
2016
 
0.84
%
 
0.69
%
 
0.84
%
 
0.69
%
 
0.75
%
 
0.75
%


Short-term Debt (Applies to AEP and SWEPCo)

Outstanding short-term debt was as follows:
 
 
 
 
June 30, 2017
 
December 31, 2016
Company
 
Type of Debt
 
Outstanding
Amount
 
Interest
Rate (a)
 
Outstanding
Amount
 
Interest
Rate (a)
 
 
 
 
(in millions)
 
 
 
(in millions)
 
 
AEP
 
Securitized Debt for Receivables (b)
 
$
519.0

 
1.09
%
 
$
673.0

 
0.70
%
AEP
 
Commercial Paper
 
1,324.0

 
1.43
%
 
1,040.0

 
1.02
%
SWEPCo
 
Notes Payable
 
8.7

 
2.77
%
 
—

 
—
%
 
 
Total Short-term Debt
 
$
1,851.7

 
 

 
$
1,713.0

 
 


(a)
Weighted average rate.
(b)
Amount of securitized debt for receivables as accounted for under the “Transfers and Servicing” accounting guidance.

Credit Facilities

For a discussion of credit facilities, see “Letters of Credit” section of Note 5.

Securitized Accounts Receivables – AEP Credit (Applies to AEP)

AEP Credit has a receivables securitization agreement with bank conduits.  Under the securitization agreement, AEP Credit receives financing from the bank conduits for the interest in the receivables AEP Credit acquires from affiliated utility subsidiaries.  These securitized transactions allow AEP Credit to repay its outstanding debt obligations, continue to purchase the operating companies’ receivables and accelerate AEP Credit’s cash collections.

AEP Credit’s receivables securitization agreement provides a commitment of $750 million from bank conduits to purchase receivables and expires in June 2019.

Accounts receivable information for AEP Credit is as follows:
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
(dollars in millions)
Effective Interest Rates on Securitization of Accounts Receivable
 
1.17
%
 
0.63
%
 
1.09
%
 
0.61
%
Net Uncollectible Accounts Receivable Written Off
 
$
5.3

 
$
4.1

 
$
11.2

 
$
9.8


 
 
June 30, 2017
 
December 31, 2016
 
 
(in millions)
Accounts Receivable Retained Interest and Pledged as Collateral Less Uncollectible Accounts
 
$
921.7

 
$
945.0

Short-term – Securitized Debt of Receivables
 
519.0

 
673.0

Delinquent Securitized Accounts Receivable
 
44.3

 
42.7

Bad Debt Reserves Related to Securitization
 
27.7

 
27.7

Unbilled Receivables Related to Securitization
 
347.9

 
322.1



AEP Credit’s delinquent customer accounts receivable represent accounts greater than 30 days past due.

Securitized Accounts Receivables – AEP Credit (Applies to Registrant Subsidiaries, except AEPTCo)

Under this sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit’s financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary’s receivables.  APCo does not have regulatory authority to sell its West Virginia accounts receivable.  The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries’ statements of income.  The Registrant Subsidiaries manage and service their customer accounts receivable, which are sold to AEP Credit. AEP Credit securitizes the eligible receivables for the operating companies and retains the remainder.

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary was as follows:
Company
 
June 30, 2017
 
December 31, 2016
 
 
(in millions)
APCo
 
$
127.5

 
$
142.0

I&M
 
145.6

 
136.7

OPCo
 
322.4

 
388.3

PSO
 
136.1

 
110.4

SWEPCo
 
163.5

 
130.9



The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Company
 
2017
 
2016
 
2017
 
2016
 
 
(in millions)
APCo
 
$
1.3

 
$
2.0

 
$
2.7

 
$
3.8

I&M
 
1.6

 
1.7

 
3.1

 
3.6

OPCo
 
4.7

 
7.4

 
10.4

 
15.3

PSO
 
1.7

 
1.5

 
3.2

 
2.9

SWEPCo
 
1.8

 
1.7

 
3.4

 
3.2



The Registrant Subsidiaries’ proceeds on the sale of receivables to AEP Credit were:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Company
 
2017
 
2016
 
2017
 
2016
 
 
(in millions)
APCo
 
$
324.2

 
$
325.5

 
$
693.9

 
$
709.9

I&M
 
390.7

 
384.1

 
809.0

 
772.2

OPCo
 
493.1

 
613.7

 
1,125.4

 
1,260.3

PSO
 
328.7

 
309.2

 
615.5

 
581.3

SWEPCo
 
404.6

 
387.4

 
745.8

 
723.5
Public Service Co Of Oklahoma [Member]  
Financing Activities
FINANCING ACTIVITIES

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

Long-term Debt Outstanding (Applies to AEP)

The following table details long-term debt outstanding:
Type of Debt
 
June 30, 2017
 
December 31, 2016
 
 
 
(in millions)
 
Senior Unsecured Notes
 
$
14,728.9

 
$
14,761.0

(b)
Pollution Control Bonds
 
1,611.1

 
1,725.1

 
Notes Payable
 
259.7

 
326.9

 
Securitization Bonds
 
1,555.8

 
1,705.0

 
Spent Nuclear Fuel Obligation (a)
 
267.1

 
266.3

 
Other Long-term Debt
 
1,129.3

 
1,606.9

 
Total Long-term Debt Outstanding
 
19,551.9

 
20,391.2

(b)
Long-term Debt Due Within One Year
 
2,755.0

 
3,013.4

(b)
Long-term Debt
 
$
16,796.9

 
$
17,377.8

(b)


(a)
Pursuant to the Nuclear Waste Policy Act of 1982, I&M, a nuclear licensee, has an obligation to the United States Department of Energy for spent nuclear fuel disposal.  The obligation includes a one-time fee for nuclear fuel consumed prior to April 7, 1983.  Trust fund assets related to this obligation were $310 million and $311 million as of June 30, 2017 and December 31, 2016, respectively, and are included in Spent Nuclear Fuel and Decommissioning Trusts on the balance sheets.
(b)
Amounts include debt related to the Lawrenceburg Plant that has been classified as Liabilities Held for Sale on the balance sheet. See “Gavin, Waterford, Darby and Lawrenceburg Plants (Generation & Marketing Segment)” section of Note 6 for additional information.

Long-term Debt Activity

Long-term debt and other securities issued, retired and principal payments made during the first six months of 2017 are shown in the tables below:
Company
 
Type of Debt
 
Principal Amount (a)
 
Interest Rate
 
Due Date
Issuances:
 
 
 
(in millions)
 
(%)
 
 
APCo
 
Senior Unsecured Notes
 
$
325.0

 
3.30
 
2027
I&M
 
Pollution Control Bonds
 
25.0

 
Variable
 
2019
I&M
 
Pollution Control Bonds
 
40.0

 
2.05
 
2021
I&M
 
Pollution Control Bonds
 
52.0

 
Variable
 
2021
I&M
 
Senior Unsecured Notes
 
300.0

 
3.75
 
2047
SWEPCo
 
Other Long-term Debt
 
115.0

 
Variable
 
2020
 
 
 
 


 

 

Non-Registrant:
 
 
 


 

 

KPCo
 
Pollution Control Bonds
 
65.0

 
2.00
 
2020
Transource Missouri
 
Other Long-term Debt
 
7.0

 
Variable
 
2018
Transource Energy
 
Other Long-term Debt
 
132.1

 
Variable
 
2020
Total Issuances
 
 
 
$
1,061.1

 

 


(a)
Amounts indicated on the statements of cash flows are net of issuance costs and premium or discount and will not tie to the issuance amounts.
Company
 
Type of Debt
 
 Principal Amount Paid
 
Interest Rate
 
Due Date
Retirements and Principal Payments:
 
 
 
(in millions)
 
(%)
 
 
APCo
 
Senior Unsecured Notes
 
$
250.0

 
5.00
 
2017
APCo
 
Securitization Bonds
 
11.5

 
2.008
 
2024
APCo
 
Pollution Control Bonds
 
104.4

 
Variable
 
2017
I&M
 
Notes Payable
 
3.3

 
Variable
 
2017
I&M
 
Pollution Control Bonds
 
25.0

 
Variable
 
2017
I&M
 
Notes Payable
 
14.9

 
Variable
 
2019
I&M
 
Notes Payable
 
15.8

 
Variable
 
2019
I&M
 
Notes Payable
 
15.9

 
Variable
 
2020
I&M
 
Pollution Control Bonds
 
52.0

 
Variable
 
2017
I&M
 
Notes Payable
 
15.7

 
Variable
 
2021
I&M
 
Other Long-term Debt
 
0.7

 
6.00
 
2025
I&M
 
Pollution Control Bonds
 
50.0

 
Variable
 
2025
OPCo
 
Securitization Bonds
 
22.5

 
0.958
 
2018
PSO
 
Other Long-term Debt
 
0.2

 
3.00
 
2027
SWEPCo
 
Senior Unsecured Notes
 
250.0

 
5.55
 
2017
SWEPCo
 
Other Long-term Debt
 
100.0

 
Variable
 
2017
SWEPCo
 
Other Long-term Debt
 
0.1

 
3.50
 
2023
SWEPCo
 
Other Long-term Debt
 
0.1

 
4.28
 
2023
SWEPCo
 
Notes Payable
 
1.6

 
4.58
 
2032
 
 
 
 
 
 
 
 
 
Non-Registrant:
 
 
 
 
 
 
 
 
AEGCo
 
Senior Unsecured Notes
 
152.7

 
6.33
 
2037
AGR
 
Other Long-term Debt
 
500.0

 
Variable
 
2017
KPCo
 
Pollution Control Bonds
 
65.0

 
Variable
 
2017
TCC
 
Securitization Bonds
 
27.2

 
0.88
 
2017
TCC
 
Securitization Bonds
 
89.9

 
5.17
 
2018
Transource Missouri
 
Other Long-term Debt
 
130.8

 
Variable
 
2018
Total Retirements and Principal Payments
 
 
 
$
1,899.3

 
 
 
 


In July 2017, I&M retired $5 million of Notes Payable related to DCC Fuel.

In July 2017, OPCo retired $24 million of Securitization Bonds.

In July 2017, AEP Texas retired $71 million of Securitization Bonds.

As of June 30, 2017, trustees held, on behalf of AEP, $728 million of their reacquired Pollution Control Bonds. Of this total, $104 million, $50 million and $345 million related to APCo, I&M and OPCo, respectively.

Debt Covenants (Applies to AEP and AEPTCo)

Covenants in AEPTCo’s note purchase agreements and indenture also limit the amount of contractually-defined priority debt (which includes a further sub-limit of $50 million of secured debt) to 10% of consolidated tangible net assets. The method for calculating the consolidated tangible net assets is contractually defined in the note purchase agreements.
Dividend Restrictions

Utility Subsidiaries’ Restrictions

Parent depends on its utility subsidiaries to pay dividends to shareholders. AEP utility subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the subsidiaries to transfer funds to Parent in the form of dividends.

All of the dividends declared by AEP’s utility subsidiaries that provide transmission or local distribution services are subject to a Federal Power Act restriction that prohibits the payment of dividends out of capital accounts without regulatory approval; payment of dividends is allowed out of retained earnings only. Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generation plants. Because of their ownership of such plants, this reserve applies to AGR, APCo and I&M.

Certain AEP subsidiaries have credit agreements that contain a covenant that limits their debt to capitalization ratio to 67.5%. The payment of cash dividends indirectly results in an increase in the percentage of debt to total capitalization of the AEP subsidiary distributing the dividend. The method for calculating outstanding debt and capitalization is contractually defined in the credit agreements.

As of June 30, 2017, the Federal Power Act restriction does not limit the ability of the AEP subsidiaries to pay dividends out of retained earnings.

Parent Restrictions (Applies to AEP)

The holders of AEP’s common stock are entitled to receive the dividends declared by the Board of Directors provided funds are legally available for such dividends.  Parent’s income primarily derives from common stock equity in the earnings of its utility subsidiaries.

Pursuant to the leverage restrictions in credit agreements, AEP must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%.  The payment of cash dividends indirectly results in an increase in the percentage of debt to total capitalization of the company distributing the dividend.  The method for calculating outstanding debt and capitalization is contractually defined in the credit agreements.

Corporate Borrowing Program - AEP System (Applies to Registrant Subsidiaries)

The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of AEP’s subsidiaries.  The corporate borrowing program includes a Utility Money Pool, which funds AEP’s utility subsidiaries, and a Nonutility Money Pool, which funds certain AEP nonutility subsidiaries.  The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with the FERC.  The amounts of outstanding loans to (borrowings from) the Utility Money Pool as of June 30, 2017 and December 31, 2016 are included in Advances to Affiliates and Advances from Affiliates, respectively, on each of the Registrant Subsidiaries’ balance sheets.  The Utility Money Pool participants’ money pool activity and their corresponding authorized borrowing limits for the six months ended June 30, 2017 are described in the following table:
 
 
Maximum
 
 
 
Average
 
 
 
Net
 
 
 
 
 
Borrowings
 
Maximum
 
Borrowings
 
Average
 
Borrowings from
 
Authorized
 
 
 
from the
 
Loans to the
 
from the
 
Loans to the
 
the Utility Money
 
Short-term
 
 
 
Utility
 
Utility
 
Utility
 
Utility
 
Pool as of
 
Borrowing
 
Company
 
Money Pool
 
Money Pool
 
Money Pool
 
Money Pool
 
June 30, 2017
 
Limit
 
 
 
(in millions)
 
AEPTCo
 
$
333.3

 
$
52.9

 
$
170.7

 
$
12.3

 
$
246.3

 
$
795.0

(a)
APCo
 
231.5

 
160.7

 
179.1

 
36.4

 
100.9

 
600.0

 
I&M
 
367.4

 
12.6

 
258.6

 
12.6

 
30.8

 
500.0

 
OPCo
 
243.7

 
56.2

 
91.7

 
27.9

 
190.5

 
400.0

 
PSO
 
185.2

 
—

 
123.6

 
—

 
141.4

 
300.0

 
SWEPCo
 
187.5

 
178.6

 
132.4

 
169.5

 
58.6

 
350.0

 


(a)
Amount represents the combined authorized short-term borrowing limit the State Transcos have through their agreements with the FERC or state regulatory commissions.

The activity in the above table does not include short-term lending activity of SWEPCo’s wholly-owned subsidiary, Mutual Energy SWEPCo, LLC, which is a participant in the Nonutility Money Pool. The amounts of outstanding loans to the Nonutility Money Pool as of June 30, 2017 and December 31, 2016 are included in Advances to Affiliates on SWEPCo’s balance sheets. For the six months ended June 30, 2017, Mutual Energy SWEPCo, LLC had the following activity in the Nonutility Money Pool:
Maximum
 
Average
 
Loans
Loans
 
Loans
 
to the Nonutility
to the Nonutility
 
to the Nonutility
 
Money Pool as of
Money Pool
 
Money Pool
 
June 30, 2017
(in millions)
$
2.0

 
$
2.0

 
$
2.0



AEP has a direct financing relationship with AEPTCo to meet their short-term borrowing needs. The amounts of outstanding loans to (borrowings from) AEP as of June 30, 2017 and December 31, 2016 are included in Advances to Affiliates and Advances from Affiliates, respectively, on AEPTCo’s balance sheets. AEPTCo’s direct borrowing and lending activity with AEP for the six months ended June 30, 2017 is described in the following table:
Maximum
 
Maximum
 
Average
 
Average
 
Borrowings from
 
Loans to
 
Authorized
Borrowings
 
Loans
 
Borrowings
 
Loans
 
AEP as of
 
AEP as of
 
Short-term
from AEP
 
to AEP
 
from AEP
 
to AEP
 
June 30, 2017
 
June 30, 2017
 
Borrowing Limit
(in millions)
$
1.1

 
$
78.9

 
$
1.1

 
$
34.8

 
$
1.1

 
$
22.2

 
$
75.0



The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:
 
 
Six Months Ended June 30,
 
 
2017
 
2016
Maximum Interest Rate
 
1.44
%
 
0.84
%
Minimum Interest Rate
 
0.92
%
 
0.69
%


The average interest rates for funds borrowed from and loaned to the Utility Money Pool are summarized for all Registrant Subsidiaries in the following table:
 
 
Average Interest Rate
 
Average Interest Rate
 
 
for Funds Borrowed
 
for Funds Loaned
 
 
from the Utility Money Pool for
 
to the Utility Money Pool for
 
 
Six Months Ended June 30,
 
Six Months Ended June 30,
Company
 
2017
 
2016
 
2017
 
2016
AEPTCo
 
1.25
%
 
0.76
%
 
0.99
%
 
0.74
%
APCo
 
1.17
%
 
0.75
%
 
1.22
%
 
0.75
%
I&M
 
1.20
%
 
0.72
%
 
1.18
%
 
0.75
%
OPCo
 
1.31
%
 
0.79
%
 
0.98
%
 
0.74
%
PSO
 
1.23
%
 
0.76
%
 
—
%
 
0.73
%
SWEPCo
 
1.20
%
 
0.75
%
 
0.98
%
 
—
%


Maximum, minimum and average interest rates for funds loaned to the Nonutility Money Pool are summarized for Mutual Energy SWEPCo, LLC in the following table:
 
 
Maximum
 
Minimum
 
Average
 
 
Interest Rate
 
Interest Rate
 
Interest Rate
Six Months
 
for Funds Loaned
 
for Funds Loaned
 
for Funds Loaned
Ended
 
to the Nonutility
 
 to the Nonutility
 
to the Nonutility
June 30,
Money Pool
 
Money Pool
 
Money Pool
2017
 
1.44
%
 
—
%
 
1.17
%
2016
 
0.84
%
 
0.69
%
 
0.75
%


AEPTCo’s maximum, minimum and average interest rates for funds either borrowed from or loaned to AEP are summarized in the following table:
 
 
Maximum
 
Minimum
 
Maximum
 
Minimum
 
Average
 
Average
 
 
Interest Rate
 
Interest Rate
 
Interest Rate
 
Interest Rate
 
Interest Rate
 
Interest Rate
Six Months
 
for Funds
 
for Funds
 
for Funds
 
for Funds
 
for Funds
 
for Funds
Ended
 
Borrowed
 
Borrowed
 
Loaned
 
Loaned
 
Borrowed
 
Loaned
June 30,
 
from AEP
 
from AEP
to AEP
 
to AEP
 
from AEP
 
to AEP
2017
 
1.44
%
 
0.92
%
 
1.44
%
 
0.92
%
 
1.18
%
 
1.21
%
2016
 
0.84
%
 
0.69
%
 
0.84
%
 
0.69
%
 
0.75
%
 
0.75
%


Short-term Debt (Applies to AEP and SWEPCo)

Outstanding short-term debt was as follows:
 
 
 
 
June 30, 2017
 
December 31, 2016
Company
 
Type of Debt
 
Outstanding
Amount
 
Interest
Rate (a)
 
Outstanding
Amount
 
Interest
Rate (a)
 
 
 
 
(in millions)
 
 
 
(in millions)
 
 
AEP
 
Securitized Debt for Receivables (b)
 
$
519.0

 
1.09
%
 
$
673.0

 
0.70
%
AEP
 
Commercial Paper
 
1,324.0

 
1.43
%
 
1,040.0

 
1.02
%
SWEPCo
 
Notes Payable
 
8.7

 
2.77
%
 
—

 
—
%
 
 
Total Short-term Debt
 
$
1,851.7

 
 

 
$
1,713.0

 
 


(a)
Weighted average rate.
(b)
Amount of securitized debt for receivables as accounted for under the “Transfers and Servicing” accounting guidance.

Credit Facilities

For a discussion of credit facilities, see “Letters of Credit” section of Note 5.

Securitized Accounts Receivables – AEP Credit (Applies to AEP)

AEP Credit has a receivables securitization agreement with bank conduits.  Under the securitization agreement, AEP Credit receives financing from the bank conduits for the interest in the receivables AEP Credit acquires from affiliated utility subsidiaries.  These securitized transactions allow AEP Credit to repay its outstanding debt obligations, continue to purchase the operating companies’ receivables and accelerate AEP Credit’s cash collections.

AEP Credit’s receivables securitization agreement provides a commitment of $750 million from bank conduits to purchase receivables and expires in June 2019.

Accounts receivable information for AEP Credit is as follows:
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
(dollars in millions)
Effective Interest Rates on Securitization of Accounts Receivable
 
1.17
%
 
0.63
%
 
1.09
%
 
0.61
%
Net Uncollectible Accounts Receivable Written Off
 
$
5.3

 
$
4.1

 
$
11.2

 
$
9.8


 
 
June 30, 2017
 
December 31, 2016
 
 
(in millions)
Accounts Receivable Retained Interest and Pledged as Collateral Less Uncollectible Accounts
 
$
921.7

 
$
945.0

Short-term – Securitized Debt of Receivables
 
519.0

 
673.0

Delinquent Securitized Accounts Receivable
 
44.3

 
42.7

Bad Debt Reserves Related to Securitization
 
27.7

 
27.7

Unbilled Receivables Related to Securitization
 
347.9

 
322.1



AEP Credit’s delinquent customer accounts receivable represent accounts greater than 30 days past due.

Securitized Accounts Receivables – AEP Credit (Applies to Registrant Subsidiaries, except AEPTCo)

Under this sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit’s financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary’s receivables.  APCo does not have regulatory authority to sell its West Virginia accounts receivable.  The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries’ statements of income.  The Registrant Subsidiaries manage and service their customer accounts receivable, which are sold to AEP Credit. AEP Credit securitizes the eligible receivables for the operating companies and retains the remainder.

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary was as follows:
Company
 
June 30, 2017
 
December 31, 2016
 
 
(in millions)
APCo
 
$
127.5

 
$
142.0

I&M
 
145.6

 
136.7

OPCo
 
322.4

 
388.3

PSO
 
136.1

 
110.4

SWEPCo
 
163.5

 
130.9



The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Company
 
2017
 
2016
 
2017
 
2016
 
 
(in millions)
APCo
 
$
1.3

 
$
2.0

 
$
2.7

 
$
3.8

I&M
 
1.6

 
1.7

 
3.1

 
3.6

OPCo
 
4.7

 
7.4

 
10.4

 
15.3

PSO
 
1.7

 
1.5

 
3.2

 
2.9

SWEPCo
 
1.8

 
1.7

 
3.4

 
3.2



The Registrant Subsidiaries’ proceeds on the sale of receivables to AEP Credit were:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Company
 
2017
 
2016
 
2017
 
2016
 
 
(in millions)
APCo
 
$
324.2

 
$
325.5

 
$
693.9

 
$
709.9

I&M
 
390.7

 
384.1

 
809.0

 
772.2

OPCo
 
493.1

 
613.7

 
1,125.4

 
1,260.3

PSO
 
328.7

 
309.2

 
615.5

 
581.3

SWEPCo
 
404.6

 
387.4

 
745.8

 
723.5
Southwestern Electric Power Co [Member]  
Financing Activities
FINANCING ACTIVITIES

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

Long-term Debt Outstanding (Applies to AEP)

The following table details long-term debt outstanding:
Type of Debt
 
June 30, 2017
 
December 31, 2016
 
 
 
(in millions)
 
Senior Unsecured Notes
 
$
14,728.9

 
$
14,761.0

(b)
Pollution Control Bonds
 
1,611.1

 
1,725.1

 
Notes Payable
 
259.7

 
326.9

 
Securitization Bonds
 
1,555.8

 
1,705.0

 
Spent Nuclear Fuel Obligation (a)
 
267.1

 
266.3

 
Other Long-term Debt
 
1,129.3

 
1,606.9

 
Total Long-term Debt Outstanding
 
19,551.9

 
20,391.2

(b)
Long-term Debt Due Within One Year
 
2,755.0

 
3,013.4

(b)
Long-term Debt
 
$
16,796.9

 
$
17,377.8

(b)


(a)
Pursuant to the Nuclear Waste Policy Act of 1982, I&M, a nuclear licensee, has an obligation to the United States Department of Energy for spent nuclear fuel disposal.  The obligation includes a one-time fee for nuclear fuel consumed prior to April 7, 1983.  Trust fund assets related to this obligation were $310 million and $311 million as of June 30, 2017 and December 31, 2016, respectively, and are included in Spent Nuclear Fuel and Decommissioning Trusts on the balance sheets.
(b)
Amounts include debt related to the Lawrenceburg Plant that has been classified as Liabilities Held for Sale on the balance sheet. See “Gavin, Waterford, Darby and Lawrenceburg Plants (Generation & Marketing Segment)” section of Note 6 for additional information.

Long-term Debt Activity

Long-term debt and other securities issued, retired and principal payments made during the first six months of 2017 are shown in the tables below:
Company
 
Type of Debt
 
Principal Amount (a)
 
Interest Rate
 
Due Date
Issuances:
 
 
 
(in millions)
 
(%)
 
 
APCo
 
Senior Unsecured Notes
 
$
325.0

 
3.30
 
2027
I&M
 
Pollution Control Bonds
 
25.0

 
Variable
 
2019
I&M
 
Pollution Control Bonds
 
40.0

 
2.05
 
2021
I&M
 
Pollution Control Bonds
 
52.0

 
Variable
 
2021
I&M
 
Senior Unsecured Notes
 
300.0

 
3.75
 
2047
SWEPCo
 
Other Long-term Debt
 
115.0

 
Variable
 
2020
 
 
 
 


 

 

Non-Registrant:
 
 
 


 

 

KPCo
 
Pollution Control Bonds
 
65.0

 
2.00
 
2020
Transource Missouri
 
Other Long-term Debt
 
7.0

 
Variable
 
2018
Transource Energy
 
Other Long-term Debt
 
132.1

 
Variable
 
2020
Total Issuances
 
 
 
$
1,061.1

 

 


(a)
Amounts indicated on the statements of cash flows are net of issuance costs and premium or discount and will not tie to the issuance amounts.
Company
 
Type of Debt
 
 Principal Amount Paid
 
Interest Rate
 
Due Date
Retirements and Principal Payments:
 
 
 
(in millions)
 
(%)
 
 
APCo
 
Senior Unsecured Notes
 
$
250.0

 
5.00
 
2017
APCo
 
Securitization Bonds
 
11.5

 
2.008
 
2024
APCo
 
Pollution Control Bonds
 
104.4

 
Variable
 
2017
I&M
 
Notes Payable
 
3.3

 
Variable
 
2017
I&M
 
Pollution Control Bonds
 
25.0

 
Variable
 
2017
I&M
 
Notes Payable
 
14.9

 
Variable
 
2019
I&M
 
Notes Payable
 
15.8

 
Variable
 
2019
I&M
 
Notes Payable
 
15.9

 
Variable
 
2020
I&M
 
Pollution Control Bonds
 
52.0

 
Variable
 
2017
I&M
 
Notes Payable
 
15.7

 
Variable
 
2021
I&M
 
Other Long-term Debt
 
0.7

 
6.00
 
2025
I&M
 
Pollution Control Bonds
 
50.0

 
Variable
 
2025
OPCo
 
Securitization Bonds
 
22.5

 
0.958
 
2018
PSO
 
Other Long-term Debt
 
0.2

 
3.00
 
2027
SWEPCo
 
Senior Unsecured Notes
 
250.0

 
5.55
 
2017
SWEPCo
 
Other Long-term Debt
 
100.0

 
Variable
 
2017
SWEPCo
 
Other Long-term Debt
 
0.1

 
3.50
 
2023
SWEPCo
 
Other Long-term Debt
 
0.1

 
4.28
 
2023
SWEPCo
 
Notes Payable
 
1.6

 
4.58
 
2032
 
 
 
 
 
 
 
 
 
Non-Registrant:
 
 
 
 
 
 
 
 
AEGCo
 
Senior Unsecured Notes
 
152.7

 
6.33
 
2037
AGR
 
Other Long-term Debt
 
500.0

 
Variable
 
2017
KPCo
 
Pollution Control Bonds
 
65.0

 
Variable
 
2017
TCC
 
Securitization Bonds
 
27.2

 
0.88
 
2017
TCC
 
Securitization Bonds
 
89.9

 
5.17
 
2018
Transource Missouri
 
Other Long-term Debt
 
130.8

 
Variable
 
2018
Total Retirements and Principal Payments
 
 
 
$
1,899.3

 
 
 
 


In July 2017, I&M retired $5 million of Notes Payable related to DCC Fuel.

In July 2017, OPCo retired $24 million of Securitization Bonds.

In July 2017, AEP Texas retired $71 million of Securitization Bonds.

As of June 30, 2017, trustees held, on behalf of AEP, $728 million of their reacquired Pollution Control Bonds. Of this total, $104 million, $50 million and $345 million related to APCo, I&M and OPCo, respectively.

Debt Covenants (Applies to AEP and AEPTCo)

Covenants in AEPTCo’s note purchase agreements and indenture also limit the amount of contractually-defined priority debt (which includes a further sub-limit of $50 million of secured debt) to 10% of consolidated tangible net assets. The method for calculating the consolidated tangible net assets is contractually defined in the note purchase agreements.
Dividend Restrictions

Utility Subsidiaries’ Restrictions

Parent depends on its utility subsidiaries to pay dividends to shareholders. AEP utility subsidiaries pay dividends to Parent provided funds are legally available. Various financing arrangements and regulatory requirements may impose certain restrictions on the ability of the subsidiaries to transfer funds to Parent in the form of dividends.

All of the dividends declared by AEP’s utility subsidiaries that provide transmission or local distribution services are subject to a Federal Power Act restriction that prohibits the payment of dividends out of capital accounts without regulatory approval; payment of dividends is allowed out of retained earnings only. Additionally, the Federal Power Act creates a reserve on earnings attributable to hydroelectric generation plants. Because of their ownership of such plants, this reserve applies to AGR, APCo and I&M.

Certain AEP subsidiaries have credit agreements that contain a covenant that limits their debt to capitalization ratio to 67.5%. The payment of cash dividends indirectly results in an increase in the percentage of debt to total capitalization of the AEP subsidiary distributing the dividend. The method for calculating outstanding debt and capitalization is contractually defined in the credit agreements.

As of June 30, 2017, the Federal Power Act restriction does not limit the ability of the AEP subsidiaries to pay dividends out of retained earnings.

Parent Restrictions (Applies to AEP)

The holders of AEP’s common stock are entitled to receive the dividends declared by the Board of Directors provided funds are legally available for such dividends.  Parent’s income primarily derives from common stock equity in the earnings of its utility subsidiaries.

Pursuant to the leverage restrictions in credit agreements, AEP must maintain a percentage of debt to total capitalization at a level that does not exceed 67.5%.  The payment of cash dividends indirectly results in an increase in the percentage of debt to total capitalization of the company distributing the dividend.  The method for calculating outstanding debt and capitalization is contractually defined in the credit agreements.

Corporate Borrowing Program - AEP System (Applies to Registrant Subsidiaries)

The AEP System uses a corporate borrowing program to meet the short-term borrowing needs of AEP’s subsidiaries.  The corporate borrowing program includes a Utility Money Pool, which funds AEP’s utility subsidiaries, and a Nonutility Money Pool, which funds certain AEP nonutility subsidiaries.  The AEP System Utility Money Pool operates in accordance with the terms and conditions of the AEP System Utility Money Pool agreement filed with the FERC.  The amounts of outstanding loans to (borrowings from) the Utility Money Pool as of June 30, 2017 and December 31, 2016 are included in Advances to Affiliates and Advances from Affiliates, respectively, on each of the Registrant Subsidiaries’ balance sheets.  The Utility Money Pool participants’ money pool activity and their corresponding authorized borrowing limits for the six months ended June 30, 2017 are described in the following table:
 
 
Maximum
 
 
 
Average
 
 
 
Net
 
 
 
 
 
Borrowings
 
Maximum
 
Borrowings
 
Average
 
Borrowings from
 
Authorized
 
 
 
from the
 
Loans to the
 
from the
 
Loans to the
 
the Utility Money
 
Short-term
 
 
 
Utility
 
Utility
 
Utility
 
Utility
 
Pool as of
 
Borrowing
 
Company
 
Money Pool
 
Money Pool
 
Money Pool
 
Money Pool
 
June 30, 2017
 
Limit
 
 
 
(in millions)
 
AEPTCo
 
$
333.3

 
$
52.9

 
$
170.7

 
$
12.3

 
$
246.3

 
$
795.0

(a)
APCo
 
231.5

 
160.7

 
179.1

 
36.4

 
100.9

 
600.0

 
I&M
 
367.4

 
12.6

 
258.6

 
12.6

 
30.8

 
500.0

 
OPCo
 
243.7

 
56.2

 
91.7

 
27.9

 
190.5

 
400.0

 
PSO
 
185.2

 
—

 
123.6

 
—

 
141.4

 
300.0

 
SWEPCo
 
187.5

 
178.6

 
132.4

 
169.5

 
58.6

 
350.0

 


(a)
Amount represents the combined authorized short-term borrowing limit the State Transcos have through their agreements with the FERC or state regulatory commissions.

The activity in the above table does not include short-term lending activity of SWEPCo’s wholly-owned subsidiary, Mutual Energy SWEPCo, LLC, which is a participant in the Nonutility Money Pool. The amounts of outstanding loans to the Nonutility Money Pool as of June 30, 2017 and December 31, 2016 are included in Advances to Affiliates on SWEPCo’s balance sheets. For the six months ended June 30, 2017, Mutual Energy SWEPCo, LLC had the following activity in the Nonutility Money Pool:
Maximum
 
Average
 
Loans
Loans
 
Loans
 
to the Nonutility
to the Nonutility
 
to the Nonutility
 
Money Pool as of
Money Pool
 
Money Pool
 
June 30, 2017
(in millions)
$
2.0

 
$
2.0

 
$
2.0



AEP has a direct financing relationship with AEPTCo to meet their short-term borrowing needs. The amounts of outstanding loans to (borrowings from) AEP as of June 30, 2017 and December 31, 2016 are included in Advances to Affiliates and Advances from Affiliates, respectively, on AEPTCo’s balance sheets. AEPTCo’s direct borrowing and lending activity with AEP for the six months ended June 30, 2017 is described in the following table:
Maximum
 
Maximum
 
Average
 
Average
 
Borrowings from
 
Loans to
 
Authorized
Borrowings
 
Loans
 
Borrowings
 
Loans
 
AEP as of
 
AEP as of
 
Short-term
from AEP
 
to AEP
 
from AEP
 
to AEP
 
June 30, 2017
 
June 30, 2017
 
Borrowing Limit
(in millions)
$
1.1

 
$
78.9

 
$
1.1

 
$
34.8

 
$
1.1

 
$
22.2

 
$
75.0



The maximum and minimum interest rates for funds either borrowed from or loaned to the Utility Money Pool were as follows:
 
 
Six Months Ended June 30,
 
 
2017
 
2016
Maximum Interest Rate
 
1.44
%
 
0.84
%
Minimum Interest Rate
 
0.92
%
 
0.69
%


The average interest rates for funds borrowed from and loaned to the Utility Money Pool are summarized for all Registrant Subsidiaries in the following table:
 
 
Average Interest Rate
 
Average Interest Rate
 
 
for Funds Borrowed
 
for Funds Loaned
 
 
from the Utility Money Pool for
 
to the Utility Money Pool for
 
 
Six Months Ended June 30,
 
Six Months Ended June 30,
Company
 
2017
 
2016
 
2017
 
2016
AEPTCo
 
1.25
%
 
0.76
%
 
0.99
%
 
0.74
%
APCo
 
1.17
%
 
0.75
%
 
1.22
%
 
0.75
%
I&M
 
1.20
%
 
0.72
%
 
1.18
%
 
0.75
%
OPCo
 
1.31
%
 
0.79
%
 
0.98
%
 
0.74
%
PSO
 
1.23
%
 
0.76
%
 
—
%
 
0.73
%
SWEPCo
 
1.20
%
 
0.75
%
 
0.98
%
 
—
%


Maximum, minimum and average interest rates for funds loaned to the Nonutility Money Pool are summarized for Mutual Energy SWEPCo, LLC in the following table:
 
 
Maximum
 
Minimum
 
Average
 
 
Interest Rate
 
Interest Rate
 
Interest Rate
Six Months
 
for Funds Loaned
 
for Funds Loaned
 
for Funds Loaned
Ended
 
to the Nonutility
 
 to the Nonutility
 
to the Nonutility
June 30,
Money Pool
 
Money Pool
 
Money Pool
2017
 
1.44
%
 
—
%
 
1.17
%
2016
 
0.84
%
 
0.69
%
 
0.75
%


AEPTCo’s maximum, minimum and average interest rates for funds either borrowed from or loaned to AEP are summarized in the following table:
 
 
Maximum
 
Minimum
 
Maximum
 
Minimum
 
Average
 
Average
 
 
Interest Rate
 
Interest Rate
 
Interest Rate
 
Interest Rate
 
Interest Rate
 
Interest Rate
Six Months
 
for Funds
 
for Funds
 
for Funds
 
for Funds
 
for Funds
 
for Funds
Ended
 
Borrowed
 
Borrowed
 
Loaned
 
Loaned
 
Borrowed
 
Loaned
June 30,
 
from AEP
 
from AEP
to AEP
 
to AEP
 
from AEP
 
to AEP
2017
 
1.44
%
 
0.92
%
 
1.44
%
 
0.92
%
 
1.18
%
 
1.21
%
2016
 
0.84
%
 
0.69
%
 
0.84
%
 
0.69
%
 
0.75
%
 
0.75
%


Short-term Debt (Applies to AEP and SWEPCo)

Outstanding short-term debt was as follows:
 
 
 
 
June 30, 2017
 
December 31, 2016
Company
 
Type of Debt
 
Outstanding
Amount
 
Interest
Rate (a)
 
Outstanding
Amount
 
Interest
Rate (a)
 
 
 
 
(in millions)
 
 
 
(in millions)
 
 
AEP
 
Securitized Debt for Receivables (b)
 
$
519.0

 
1.09
%
 
$
673.0

 
0.70
%
AEP
 
Commercial Paper
 
1,324.0

 
1.43
%
 
1,040.0

 
1.02
%
SWEPCo
 
Notes Payable
 
8.7

 
2.77
%
 
—

 
—
%
 
 
Total Short-term Debt
 
$
1,851.7

 
 

 
$
1,713.0

 
 


(a)
Weighted average rate.
(b)
Amount of securitized debt for receivables as accounted for under the “Transfers and Servicing” accounting guidance.

Credit Facilities

For a discussion of credit facilities, see “Letters of Credit” section of Note 5.

Securitized Accounts Receivables – AEP Credit (Applies to AEP)

AEP Credit has a receivables securitization agreement with bank conduits.  Under the securitization agreement, AEP Credit receives financing from the bank conduits for the interest in the receivables AEP Credit acquires from affiliated utility subsidiaries.  These securitized transactions allow AEP Credit to repay its outstanding debt obligations, continue to purchase the operating companies’ receivables and accelerate AEP Credit’s cash collections.

AEP Credit’s receivables securitization agreement provides a commitment of $750 million from bank conduits to purchase receivables and expires in June 2019.

Accounts receivable information for AEP Credit is as follows:
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
 
2017
 
2016
 
2017
 
2016
 
 
(dollars in millions)
Effective Interest Rates on Securitization of Accounts Receivable
 
1.17
%
 
0.63
%
 
1.09
%
 
0.61
%
Net Uncollectible Accounts Receivable Written Off
 
$
5.3

 
$
4.1

 
$
11.2

 
$
9.8


 
 
June 30, 2017
 
December 31, 2016
 
 
(in millions)
Accounts Receivable Retained Interest and Pledged as Collateral Less Uncollectible Accounts
 
$
921.7

 
$
945.0

Short-term – Securitized Debt of Receivables
 
519.0

 
673.0

Delinquent Securitized Accounts Receivable
 
44.3

 
42.7

Bad Debt Reserves Related to Securitization
 
27.7

 
27.7

Unbilled Receivables Related to Securitization
 
347.9

 
322.1



AEP Credit’s delinquent customer accounts receivable represent accounts greater than 30 days past due.

Securitized Accounts Receivables – AEP Credit (Applies to Registrant Subsidiaries, except AEPTCo)

Under this sale of receivables arrangement, the Registrant Subsidiaries sell, without recourse, certain of their customer accounts receivable and accrued unbilled revenue balances to AEP Credit and are charged a fee based on AEP Credit’s financing costs, administrative costs and uncollectible accounts experience for each Registrant Subsidiary’s receivables.  APCo does not have regulatory authority to sell its West Virginia accounts receivable.  The costs of customer accounts receivable sold are reported in Other Operation expense on the Registrant Subsidiaries’ statements of income.  The Registrant Subsidiaries manage and service their customer accounts receivable, which are sold to AEP Credit. AEP Credit securitizes the eligible receivables for the operating companies and retains the remainder.

The amount of accounts receivable and accrued unbilled revenues under the sale of receivables agreement for each Registrant Subsidiary was as follows:
Company
 
June 30, 2017
 
December 31, 2016
 
 
(in millions)
APCo
 
$
127.5

 
$
142.0

I&M
 
145.6

 
136.7

OPCo
 
322.4

 
388.3

PSO
 
136.1

 
110.4

SWEPCo
 
163.5

 
130.9



The fees paid by the Registrant Subsidiaries to AEP Credit for customer accounts receivable sold were:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Company
 
2017
 
2016
 
2017
 
2016
 
 
(in millions)
APCo
 
$
1.3

 
$
2.0

 
$
2.7

 
$
3.8

I&M
 
1.6

 
1.7

 
3.1

 
3.6

OPCo
 
4.7

 
7.4

 
10.4

 
15.3

PSO
 
1.7

 
1.5

 
3.2

 
2.9

SWEPCo
 
1.8

 
1.7

 
3.4

 
3.2



The Registrant Subsidiaries’ proceeds on the sale of receivables to AEP Credit were:
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Company
 
2017
 
2016
 
2017
 
2016
 
 
(in millions)
APCo
 
$
324.2

 
$
325.5

 
$
693.9

 
$
709.9

I&M
 
390.7

 
384.1

 
809.0

 
772.2

OPCo
 
493.1

 
613.7

 
1,125.4

 
1,260.3

PSO
 
328.7

 
309.2

 
615.5

 
581.3

SWEPCo
 
404.6

 
387.4

 
745.8

 
723.5