Business Segments

9 Months Ended

Sep. 30, 2015

Business Segments

BUSINESS SEGMENTS

Our primary business is the generation, transmission and distribution of electricity. Within our Vertically Integrated Utilities segment, we centrally dispatch generation assets and manage our overall utility operations on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight. Intersegment sales and transfers are generally based on underlying contractual arrangements and agreements.

Our reportable segments and their related business activities are outlined below:

Vertically Integrated Utilities

• Generation, transmission and distribution of electricity for sale to retail and wholesale customers through assets owned and operated by AEGCo, APCo, I&M, KGPCo, KPCo, PSO, SWEPCo and WPCo.

Transmission and Distribution Utilities

• Transmission and distribution of electricity for sale to retail and wholesale customers through assets owned and operated by OPCo, TCC and TNC.

• OPCo purchases energy and capacity to serve SSO customers and provides transmission and distribution services for all connected load.

AEP Transmission Holdco

• Development, construction and operation of transmission facilities through investments in our wholly-owned transmission only subsidiaries and transmission only joint ventures.  These investments have PUCT-approved or FERC-approved returns on equity.

Generation & Marketing

• Nonregulated generation in ERCOT and PJM.

• Marketing, risk management and retail activities in ERCOT, PJM and MISO.

AEP River Operations

• Commercial barging operations that transports liquids, coal and dry bulk commodities primarily on the Ohio, Illinois and lower Mississippi Rivers.

• In October 2015, we signed an agreement to sell AEPRO to a nonaffiliated party. The AEP River Operations segment is comprised entirely of AEPRO. However, we will retain AEPRO's investment in IMT. See "AEPRO (AEP River Operations Segment)" section of Note 6 for additional information.

The remainder of our activities is presented as Corporate and Other.  While not considered a reportable segment, Corporate and Other primarily includes the purchasing of receivables from certain AEP utility subsidiaries. This segment also includes Parent's guarantee revenue received from affiliates, investment income, interest income and interest expense and other nonallocated costs.

The tables below present our reportable segment income statement information for the three and nine months ended September 30, 2015 and 2014 and reportable segment balance sheet information as of September 30, 2015 and December 31, 2014.  These amounts include certain estimates and allocations where necessary.

	Vertically Integrated Utilities			Transmission and Distribution Utilities		AEP Transmission Holdco		Generation & Marketing			AEP River Operations			Corporate and Other (a)			Reconciling Adjustments				Consolidated
	(in millions)
Three Months Ended   September 30, 2015
Revenues from:
External Customers	$	2,436		$	1,164	$	27	$	802		$	—		$	3		$	—		(c)	$	4,432
Other Operating Segments	35			25		61		33			—			21			(175		)		—
Total Revenues	$	2,471		$	1,189	$	88	$	835		$	—		$	24		$	(175	)		$	4,432
Income (Loss) from Continuing Operations	$	275		$	113	$	46	$	91		$	(4	)	$	(9	)	$	—			$	512
Income from Discontinued Operations, Net of Tax	—			—		—		—			8			—			—				8
Net Income (Loss)	$	275		$	113	$	46	$	91		$	4		$	(9	)	$	—			$	520
	Vertically Integrated Utilities			Transmission and Distribution Utilities		AEP Transmission Holdco		Generation & Marketing			AEP River Operations			Corporate and Other (a)			Reconciling Adjustments				Consolidated
	(in millions)
Three Months Ended   September 30, 2014
Revenues from:
External Customers	$	2,432	(b)	$	1,163	$	21	$	538	(b)	$	—		$	7		$	—		(c)	$	4,161
Other Operating Segments	18		(b)	68		34		363		(b)	—			19			(502		)		—
Total Revenues	$	2,450		$	1,231	$	55	$	901		$	—		$	26		$	(502	)		$	4,161
Income from Continuing Operations	$	220		$	92	$	43	$	117		$	—		$	11		$	—			$	483
Income from Discontinued Operations, Net of Tax	—			—		—		—			11			—			—				11
Net Income	$	220		$	92	$	43	$	117		$	11		$	11		$	—			$	494

	Vertically Integrated Utilities			Transmission and Distribution Utilities		AEP Transmission Holdco		Generation & Marketing			AEP River Operations			Corporate and Other (a)			Reconciling Adjustments				Consolidated
	(in millions)
Nine Months Ended   September 30, 2015
Revenues from:
External Customers	$	7,082		$	3,378	$	74	$	2,289		$	—		$	16		$	—		(c)	$	12,839
Other Operating Segments	77			142		171		517			—			58			(965		)		—
Total Revenues	$	7,159		$	3,520	$	245	$	2,806		$	—		$	74		$	(965	)		$	12,839
Income (Loss) from Continuing Operations	$	783		$	288	$	148	$	360		$	(2	)	$	(13	)	$	—			$	1,564
Income from Discontinued Operations, Net of Tax	—			—		—		—			18			—			—				18
Net Income (Loss)	$	783		$	288	$	148	$	360		$	16		$	(13	)	$	—			$	1,582
	Vertically Integrated Utilities			Transmission and Distribution Utilities		AEP Transmission Holdco		Generation & Marketing			AEP River Operations			Corporate and Other (a)			Reconciling Adjustments				Consolidated
	(in millions)
Nine Months Ended   September 30, 2014
Revenues from:
External Customers	$	7,217	(b)	$	3,388	$	54	$	1,932	(b)	$	—		$	19		$	(51	)	(c)	$	12,559
Other Operating Segments	71		(b)	192		86		1,133		(b)	—			55			(1,537		)		—
Total Revenues	$	7,288		$	3,580	$	140	$	3,065		$	—		$	74		$	(1,588	)		$	12,559
Income from Continuing Operations	$	654		$	279	$	114	$	378		$	1		$	4		$	—			$	1,430
Income from Discontinued Operations, Net of Tax	—			—		—		—			16			—			—				16
Net Income	$	654		$	279	$	114	$	378		$	17		$	4		$	—			$	1,446

	Vertically Integrated Utilities		Transmission and Distribution Utilities		AEP Transmission Holdco		Generation & Marketing		AEP River Operations			Corporate and Other (a)		Reconciling Adjustments				Consolidated
	(in millions)
September 30, 2015
Total Property, Plant and Equipment	$	39,981	$	13,707	$	3,594	$	7,474	$	—		$	349	$	(279	)	(d)	$	64,826
Accumulated Depreciation and Amortization	12,483		3,603		43		3,390		—			178		(109		)	(d)	19,588
Total Property, Plant and Equipment - Net	$	27,498	$	10,104	$	3,551	$	4,084	$	—		$	171	$	(170	)	(d)	$	45,238
Assets Held for Sale	$	—	$	—	$	—	$	—	$	608		$	—	$	—			$	608
Total Assets	35,272		14,441		4,362		5,531		772		(f)	21,810		(21,089		)	(d) (e)	61,099
Long-term Debt Due Within One Year:
Affiliated	$	—	$	—	$	—	$	—	$	—		$	—	$	—			$	—
Nonaffiliated	949		724		—		151		—			2		—				1,826
Long-term Debt:
Affiliated	20		—		—		32		—			—		(52		)		—
Nonaffiliated	9,900		4,888		1,323		641		—			848		—				17,600
Total Long-term Debt	$	10,869	$	5,612	$	1,323	$	824	$	—		$	850	$	(52	)		$	19,426
Liabilities Held for Sale	$	—	$	—	$	—	$	—	$	474		$	—	$	—			$	474	(g)

	Vertically Integrated Utilities		Transmission and Distribution Utilities		AEP Transmission Holdco		Generation & Marketing		AEP River Operations			Corporate and Other (a)		Reconciling Adjustments				Consolidated
	(in millions)
December 31, 2014
Total Property, Plant and Equipment	$	39,402	$	13,024	$	2,714	$	8,394	$	—		$	343	$	(271	)	(d)	$	63,606
Accumulated Depreciation and Amortization	12,773		3,481		25		3,603		—			188		(99		)	(d)	19,971
Total Property, Plant and Equipment - Net	$	26,629	$	9,543	$	2,689	$	4,791	$	—		$	155	$	(172	)	(d)	$	43,635
Assets Held for Sale	$	—	$	—	$	—	$	—	$	625		$	—	$	—			$	625
Total Assets	33,750		14,495		3,575		6,329		749		(f)	21,081		(20,346		)	(d) (e)	59,633
Long-term Debt Due Within One Year:
Affiliated	$	111	$	—	$	—	$	86	$	—		$	—	$	(197	)		$	—
Nonaffiliated	1,352		405		—		740		—			3		—				2,500
Long-term Debt:
Affiliated	20		—		—		32		—			—		(52		)		—
Nonaffiliated	8,634		5,256		1,153		217		—			841		—				16,101
Total Long-term Debt	$	10,117	$	5,661	$	1,153	$	1,075	$	—		$	844	$	(249	)		$	18,601
Liabilities Held for Sale	$	—	$	—	$	—	$	—	$	435		$	—	$	—			$	435	(g)

(a) Corporate and Other primarily includes the purchasing of receivables from certain AEP utility subsidiaries. This segment also includes Parent's guarantee revenue received from affiliates, investment income, interest income and interest expense and other nonallocated costs.

(b) Includes the impact of corporate separation of OPCo's generation assets and liabilities that took effect December 31, 2013, as well as the impact of the termination of the Interconnection Agreement effective January 1, 2014.

(c) Reconciling Adjustments for External Customers primarily include eliminations as a result of corporate separation in Ohio.

(d) Includes eliminations due to an intercompany capital lease.

(e) Reconciling Adjustments for Total Assets primarily include the elimination of intercompany advances to affiliates and intercompany accounts receivable along with the elimination of AEP's investments in subsidiary companies.

(f) Amounts include intercompany advances to affiliates and intercompany accounts receivable that will be settled prior to or upon the close of the sale of AEPRO.

(g) Amounts include debt related to AEPRO. See "AEPRO (AEP River Operations Segment)" section of Note 6 for additional information.

Appalachian Power Co [Member]

Business Segments

BUSINESS SEGMENTS

The Registrant Subsidiaries each have one reportable segment, an integrated electricity generation, transmission and distribution business, except OPCo, an electricity transmission and distribution business that started in 2014.  The Registrant Subsidiaries’ other activities are insignificant.  The Registrant Subsidiaries’ operations are managed on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight on the business process, cost structures and operating results.

Indiana Michigan Power Co [Member]

Business Segments

BUSINESS SEGMENTS

The Registrant Subsidiaries each have one reportable segment, an integrated electricity generation, transmission and distribution business, except OPCo, an electricity transmission and distribution business that started in 2014.  The Registrant Subsidiaries’ other activities are insignificant.  The Registrant Subsidiaries’ operations are managed on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight on the business process, cost structures and operating results.

Ohio Power Co [Member]

Business Segments

BUSINESS SEGMENTS

The Registrant Subsidiaries each have one reportable segment, an integrated electricity generation, transmission and distribution business, except OPCo, an electricity transmission and distribution business that started in 2014.  The Registrant Subsidiaries’ other activities are insignificant.  The Registrant Subsidiaries’ operations are managed on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight on the business process, cost structures and operating results.

Public Service Co Of Oklahoma [Member]

Business Segments

BUSINESS SEGMENTS

The Registrant Subsidiaries each have one reportable segment, an integrated electricity generation, transmission and distribution business, except OPCo, an electricity transmission and distribution business that started in 2014.  The Registrant Subsidiaries’ other activities are insignificant.  The Registrant Subsidiaries’ operations are managed on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight on the business process, cost structures and operating results.

Southwestern Electric Power Co [Member]

Business Segments

BUSINESS SEGMENTS

The Registrant Subsidiaries each have one reportable segment, an integrated electricity generation, transmission and distribution business, except OPCo, an electricity transmission and distribution business that started in 2014.  The Registrant Subsidiaries’ other activities are insignificant.  The Registrant Subsidiaries’ operations are managed on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight on the business process, cost structures and operating results.