Commission
|
Registrant,
State of Incorporation,
|
I.R.S.
Employer
|
||
File
Number
|
Address
of Principal Executive Offices, and Telephone Number
|
Identification
No.
|
||
1-3525
|
AMERICAN
ELECTRIC POWER COMPANY, INC. (A New York Corporation)
|
13-4922640
|
||
1-3457
|
APPALACHIAN
POWER COMPANY (A Virginia Corporation)
|
54-0124790
|
||
1-2680
|
COLUMBUS
SOUTHERN POWER COMPANY (An Ohio Corporation)
|
31-4154203
|
||
1-3570
|
INDIANA
MICHIGAN POWER COMPANY (An Indiana Corporation)
|
35-0410455
|
||
1-6543
|
OHIO
POWER COMPANY (An Ohio Corporation)
|
31-4271000
|
||
0-343
|
PUBLIC
SERVICE COMPANY OF OKLAHOMA (An Oklahoma Corporation)
|
73-0410895
|
||
1-3146
|
SOUTHWESTERN
ELECTRIC POWER COMPANY (A Delaware Corporation)
|
72-0323455
|
||
All
Registrants
|
1
Riverside Plaza, Columbus, Ohio 43215-2373
|
|||
Telephone
(614) 716-1000
|
Indicate
by check mark whether the registrants (1) have filed all reports
required
to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934
during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been
subject
to such filing requirements for the past 90 days.
|
|
Yes
X
|
No
|
Indicate
by check mark whether American Electric Power Company, Inc. is a
large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of ‘accelerated filer and large
accelerated filer’ in Rule 12b-2 of the Exchange Act. (Check
One)
|
Large
accelerated
filer X Accelerated
filer Non-accelerated
filer
|
Indicate
by check mark whether Appalachian Power Company, Columbus Southern
Power
Company, Indiana Michigan Power Company, Ohio Power Company, Public
Service Company of Oklahoma and Southwestern Electric Power Company,
are
large accelerated filers, accelerated filers, or non-accelerated
filers. See definition of ‘accelerated filer and large
accelerated filer’ in Rule 12b-2 of the Exchange Act. (Check
One)
|
|
Large
accelerated
filer Accelerated
filer Non-accelerated
filer X
|
|
Indicate
by check mark whether the registrants are shell companies (as defined
in
Rule 12b-2 of the Exchange Act).
|
|
Yes
|
No
X
|
Number
of shares of common stock outstanding of the registrants
at
July
31, 2007
|
|||
American
Electric Power Company, Inc.
|
399,203,993
|
||
($6.50
par value)
|
|||
Appalachian
Power Company
|
13,499,500
|
||
(no
par value)
|
|||
Columbus
Southern Power Company
|
16,410,426
|
||
(no
par value)
|
|||
Indiana
Michigan Power Company
|
1,400,000
|
||
(no
par value)
|
|||
Ohio
Power Company
|
27,952,473
|
||
(no
par value)
|
|||
Public
Service Company of Oklahoma
|
9,013,000
|
||
($15
par value)
|
|||
Southwestern
Electric Power Company
|
7,536,640
|
||
($18
par value)
|
Glossary
of Terms
|
|||
Forward-Looking
Information
|
|||
Part
I. FINANCIAL INFORMATION
|
|||
Items
1, 2 and 3 - Financial Statements, Management’s Financial Discussion and
Analysis and Quantitative and Qualitative Disclosures About Risk
Management Activities:
|
|||
American
Electric Power Company, Inc. and Subsidiary
Companies:
|
|||
Management’s
Financial Discussion and Analysis of Results of Operations
|
|||
Quantitative
and Qualitative Disclosures About Risk Management
Activities
|
|||
Condensed
Consolidated Financial Statements
|
|||
Index
to Condensed Notes to Condensed Consolidated Financial
Statements
|
|||
Appalachian
Power Company and Subsidiaries:
|
|||
Management’s
Financial Discussion and Analysis
|
|||
Quantitative
and Qualitative Disclosures About Risk Management
Activities
|
|||
Condensed
Consolidated Financial Statements
|
|||
Index
to Condensed Notes to Condensed Financial Statements of Registrant
Subsidiaries
|
|||
Columbus
Southern Power Company and Subsidiaries:
|
|||
Management’s
Narrative Financial Discussion and Analysis
|
|||
Quantitative
and Qualitative Disclosures About Risk Management
Activities
|
|||
Condensed
Consolidated Financial Statements
|
|||
Index
to Condensed Notes to Condensed Financial Statements of Registrant
Subsidiaries
|
|||
Indiana
Michigan Power Company and Subsidiaries:
|
|||
Management’s
Narrative Financial Discussion and Analysis
|
|||
Quantitative
and Qualitative Disclosures About Risk Management
Activities
|
|||
Condensed
Consolidated Financial Statements
|
|||
Index
to Condensed Notes to Condensed Financial Statements of Registrant
Subsidiaries
|
Ohio Power Company Consolidated:
|
||
Management’s
Financial Discussion and Analysis
|
||
Quantitative
and Qualitative Disclosures About Risk Management
Activities
|
||
Condensed
Consolidated Financial Statements
|
||
Index
to Condensed Notes to Condensed Financial Statements of
Registrant Subsidiaries
|
||
Public Service Company of
Oklahoma:
|
||
Management’s
Narrative Financial Discussion and
Analysis
|
||
Quantitative
and Qualitative Disclosures About Risk Management
Activities
|
||
Condensed
Financial Statements
|
||
Index
to Condensed Notes to Condensed Financial Statements of
Registrant Subsidiaries
|
||
Southwestern Electric Power Company
Consolidated:
|
||
Management’s
Financial Discussion and Analysis
|
||
Quantitative
and Qualitative Disclosures About Risk Management
Activities
|
||
Condensed
Consolidated Financial Statements
|
||
Index
to Condensed Notes to Condensed Financial Statements of
Registrant Subsidiaries
|
||
Condensed
Notes to Condensed Financial Statements of Registrant
Subsidiaries
|
|||||||
Combined
Management’s Discussion and Analysis of Registrant
Subsidiaries
|
|||||||
Controls
and Procedures
|
|||||||
Part
II. OTHER INFORMATION
|
|||||||
Item
1.
|
Legal
Proceedings
|
||||||
Item
1A.
|
Risk
Factors
|
||||||
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
||||||
Item
5.
|
Other
Information
|
||||||
Item
6.
|
Exhibits:
|
||||||
Exhibit
12
|
|||||||
Exhibit
31(a)
|
|||||||
Exhibit
31(b)
|
|||||||
Exhibit
31(c)
|
|||||||
Exhibit
31(d)
|
|||||||
Exhibit
32(a)
|
|||||||
Exhibit
32(b)
|
|||||||
SIGNATURE
|
This
combined Form 10-Q is separately filed by American Electric Power
Company,
Inc., Appalachian Power Company, Columbus Southern Power Company,
Indiana
Michigan Power Company, Ohio Power Company, Public Service Company
of
Oklahoma and Southwestern Electric Power Company. Information
contained herein relating to any individual registrant is filed by
such
registrant on its own behalf. Each registrant makes no representation
as
to information relating to the other
registrants.
|
Term
|
Meaning
|
ADITC
|
Accumulated
Deferred Investment Tax Credits.
|
|
AEGCo
|
AEP
Generating Company, an AEP electric utility subsidiary.
|
|
AEP
or Parent
|
American
Electric Power Company, Inc.
|
|
AEP
Consolidated
|
AEP
and its majority owned consolidated subsidiaries and consolidated
affiliates.
|
|
AEP
Credit
|
AEP
Credit, Inc., a subsidiary of AEP which factors accounts receivable
and
accrued utility revenues for affiliated domestic electric utility
companies.
|
|
AEP
East companies
|
APCo,
CSPCo, I&M, KPCo and OPCo.
|
|
AEP
System or the System
|
American
Electric Power System, an integrated electric utility system, owned
and
operated by AEP’s electric utility subsidiaries.
|
|
AEP
System Power Pool or AEP
Power Pool
|
Members
are APCo, CSPCo, I&M, KPCo and OPCo. The Pool shares the
generation, cost of generation and resultant wholesale off-system
sales of
the member companies.
|
|
AEPEP
|
AEP
Energy Partners, Inc., a subsidiary of AEP dedicated to wholesale
marketing and trading, asset management and commercial and industrial
sales in the deregulated Texas market.
|
|
AEPSC
|
American
Electric Power Service Corporation, a service subsidiary providing
management and professional services to AEP and its
subsidiaries.
|
|
AEP
West companies
|
PSO,
SWEPCo, TCC and TNC.
|
|
AFUDC
|
Allowance
for Funds Used During Construction.
|
|
ALJ
|
Administrative
Law Judge.
|
|
AOCI
|
Accumulated
Other Comprehensive Income (Loss).
|
|
APCo
|
Appalachian
Power Company, an AEP electric utility subsidiary.
|
|
ARO
|
Asset
Retirement Obligations.
|
|
CAA
|
Clean
Air Act.
|
|
CO2
|
Carbon
Dioxide.
|
|
Cook
Plant
|
Donald
C. Cook Nuclear Plant, a two-unit, 2,110 MW nuclear plant owned by
I&M.
|
|
CSPCo
|
Columbus
Southern Power Company, an AEP electric utility
subsidiary.
|
|
CSW
|
Central
and South West Corporation, a subsidiary of AEP (Effective January
21,
2003, the legal name of Central and South West Corporation was changed
to
AEP Utilities, Inc.).
|
|
CTC
|
Competition
Transition Charge.
|
|
DETM
|
Duke
Energy Trading and Marketing L.L.C., a risk management
counterparty.
|
|
E&R
|
Environmental
compliance and transmission and distribution system
reliability.
|
|
ECAR
|
East
Central Area Reliability Council.
|
|
EDFIT
|
Excess
Deferred Federal Income Taxes.
|
|
EITF
|
Financial
Accounting Standards Board’s Emerging Issues Task
Force.
|
|
ERCOT
|
Electric
Reliability Council of Texas.
|
|
FASB
|
Financial
Accounting Standards Board.
|
|
Federal
EPA
|
United
States Environmental Protection Agency.
|
|
FERC
|
Federal
Energy Regulatory Commission.
|
|
FIN
|
FASB
Interpretation No.
|
|
FIN
46
|
FIN
46, “Consolidation of Variable Interest Entities.”
|
|
FIN
48
|
FIN
48, “Accounting for Uncertainty in Income Taxes” and FASB Staff Position
FIN 48-1 “Definition of Settlement in FASB Interpretation No.
48.”
|
|
GAAP
|
Accounting
Principles Generally Accepted in the United States of
America.
|
|
HPL
|
Houston
Pipeline Company, a former AEP
subsidiary.
|
IGCC
|
Integrated
Gasification Combined Cycle, technology that turns coal into a
cleaner-burning gas.
|
|
IPP
|
Independent
Power Producer.
|
|
IRS
|
Internal
Revenue Service.
|
|
IURC
|
Indiana
Utility Regulatory Commission.
|
|
I&M
|
Indiana
Michigan Power Company, an AEP electric utility
subsidiary.
|
|
JMG
|
JMG
Funding LP.
|
|
KGPCo
|
Kingsport
Power Company, an AEP electric distribution subsidiary.
|
|
KPCo
|
Kentucky
Power Company, an AEP electric utility subsidiary.
|
|
KPSC
|
Kentucky
Public Service Commission.
|
|
kV
|
Kilovolt.
|
|
KWH
|
Kilowatthour.
|
|
LPSC
|
Louisiana
Public Service Commission.
|
|
MTM
|
Mark-to-Market.
|
|
MW
|
Megawatt.
|
|
MWH
|
Megawatthour.
|
|
NOx
|
Nitrogen
oxide.
|
|
Nonutility
Money Pool
|
AEP
System’s Nonutility Money Pool.
|
|
NRC
|
Nuclear
Regulatory Commission.
|
|
NSR
|
New
Source Review.
|
|
NYMEX
|
New
York Mercantile Exchange.
|
|
OATT
|
Open
Access Transmission Tariff.
|
|
OCC
|
Corporation
Commission of the State of Oklahoma.
|
|
OPCo
|
Ohio
Power Company, an AEP electric utility subsidiary.
|
|
OTC
|
Over
the counter.
|
|
OVEC
|
Ohio
Valley Electric Corporation, which is 43.47% owned by
AEP.
|
|
PJM
|
Pennsylvania
– New Jersey – Maryland regional transmission
organization.
|
|
PSO
|
Public
Service Company of Oklahoma, an AEP electric utility
subsidiary.
|
|
PUCO
|
Public
Utilities Commission of Ohio.
|
|
PUCT
|
Public
Utility Commission of Texas.
|
|
Registrant
Subsidiaries
|
AEP
subsidiaries which are SEC registrants; APCo, CSPCo, I&M, OPCo, PSO,
SWEPCo.
|
|
REP
|
Texas
Retail Electric Provider.
|
|
Risk
Management Contracts
|
Trading
and nontrading derivatives, including those derivatives designated
as cash
flow and fair value hedges.
|
|
Rockport
Plant
|
A
generating plant, consisting of two 1,300 MW coal-fired generating
units
near Rockport, Indiana owned by AEGCo and I&M.
|
|
RTO
|
Regional
Transmission Organization.
|
|
S&P
|
Standard
and Poor’s.
|
|
SEC
|
United
States Securities and Exchange Commission.
|
|
SECA
|
Seams
Elimination Cost Allocation.
|
|
SFAS
|
Statement
of Financial Accounting Standards issued by the Financial Accounting
Standards Board.
|
|
SFAS
71
|
Statement
of Financial Accounting Standards No. 71, “Accounting for the Effects of
Certain Types of Regulation.”
|
|
SFAS
133
|
Statement
of Financial Accounting Standards No. 133, “Accounting for Derivative
Instruments and Hedging Activities.”
|
|
SFAS
157
|
Statement
of Financial Accounting Standards No. 157, “Fair Value
Measurements.”
|
SFAS
158
|
Statement
of Financial Accounting Standards No. 158, “Employers’ Accounting for
Defined Benefit Pension and Other Postretirement
Plans.”
|
|
SFAS
159
|
Statement
of Financial Accounting Standards No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities.”
|
|
SIA
|
System
Integration Agreement.
|
|
SO2
|
Sulfur
Dioxide.
|
|
SPP
|
Southwest
Power Pool.
|
|
Sweeny
|
Sweeny
Cogeneration Limited Partnership, owner and operator of a four unit,
480
MW gas-fired generation facility, owned 50% by AEP.
|
|
SWEPCo
|
Southwestern
Electric Power Company, an AEP electric utility
subsidiary.
|
|
TCC
|
AEP
Texas Central Company, an AEP electric utility
subsidiary.
|
|
TEM
|
SUEZ
Energy Marketing NA, Inc. (formerly known as Tractebel Energy Marketing,
Inc.).
|
|
Texas
Restructuring Legislation
|
Legislation
enacted in 1999 to restructure the electric utility industry in
Texas.
|
|
TNC
|
AEP
Texas North Company, an AEP electric utility
subsidiary.
|
|
True-up
Proceeding
|
A
filing made under the Texas Restructuring Legislation to finalize
the
amount of stranded costs and other true-up items and the recovery
of such
amounts.
|
|
Utility
Money Pool
|
AEP
System’s Utility Money Pool.
|
|
VaR
|
Value
at Risk, a method to quantify risk exposure.
|
|
Virginia
SCC
|
Virginia
State Corporation Commission.
|
|
WPCo
|
Wheeling
Power Company, an AEP electric distribution subsidiary.
|
|
WVPSC
|
Public
Service Commission of West
Virginia.
|
·
|
Electric
load and customer growth.
|
·
|
Weather
conditions, including storms.
|
·
|
Available
sources and costs of, and transportation for, fuels and the
creditworthiness of fuel suppliers and transporters.
|
·
|
Availability
of generating capacity and the performance of our generating
plants.
|
·
|
Our
ability to recover regulatory assets and stranded costs in connection
with
deregulation.
|
·
|
Our
ability to recover increases in fuel and other energy costs through
regulated or competitive electric rates.
|
·
|
Our
ability to build or acquire generating capacity when needed at acceptable
prices and terms and to recover those costs through applicable rate
cases
or competitive rates.
|
·
|
New
legislation, litigation and government regulation including requirements
for reduced emissions of sulfur, nitrogen, mercury, carbon, soot
or
particulate matter and other substances.
|
·
|
Timing
and resolution of pending and future rate cases, negotiations and
other
regulatory decisions (including rate or other recovery for new
investments, transmission service and environmental
compliance).
|
·
|
Resolution
of litigation (including pending Clean Air Act enforcement actions
and
disputes arising from the bankruptcy of Enron Corp. and related
matters).
|
·
|
Our
ability to constrain operation and maintenance costs.
|
·
|
The
economic climate and growth in our service territory and changes
in market
demand and demographic patterns.
|
·
|
Inflationary
and interest rate trends.
|
·
|
Our
ability to develop and execute a strategy based on a view regarding
prices
of electricity, natural gas and other energy-related
commodities.
|
·
|
Changes
in the creditworthiness of the counterparties with whom we have
contractual arrangements, including participants in the energy trading
market.
|
·
|
Actions
of rating agencies, including changes in the ratings of
debt.
|
·
|
Volatility
and changes in markets for electricity, natural gas and other
energy-related commodities.
|
·
|
Changes
in utility regulation, including the potential for new legislation
in Ohio
and membership in and integration into regional transmission
organizations.
|
·
|
Accounting
pronouncements periodically issued by accounting standard-setting
bodies.
|
·
|
The
performance of our pension and other postretirement benefit
plans.
|
·
|
Prices
for power that we generate and sell at wholesale.
|
·
|
Changes
in technology, particularly with respect to new, developing or alternative
sources of generation.
|
·
|
Other
risks and unforeseen events, including wars, the effects of terrorism
(including increased security costs), embargoes and other catastrophic
events.
|
The
registrants expressly disclaim any obligation to update any
forward-looking information.
|
Operating
Company
|
Jurisdiction
|
Revised
Annual Rate Increase Request
|
Implemented
Annual Rate Increase
|
Effective
Date of Rate Increase
|
|||||||
(in
millions)
|
|||||||||||
APCo
|
Virginia
|
$
|
198
|
(a)
|
$
|
24
|
(a)
|
October
2006
|
|||
OPCo
|
Ohio
|
8
|
8
|
(b)
|
May
2007
|
||||||
CSPCo
|
Ohio
|
24
|
24
|
(b)
|
May
2007
|
||||||
TCC
|
Texas
|
81
|
70
|
(b)
|
June
2007
|
||||||
TNC
|
Texas
|
25
|
14
|
June
2007
|
|||||||
PSO
|
Oklahoma
|
50
|
9
|
(b)
|
July
2007
|
(a)
|
The
difference between the requested and implemented amounts of annual
rate
increase is partially offset by approximately $35 million of incremental
E&R costs which APCo anticipates to file for recovery through the
E&R surcharge mechanism in 2008. APCo also requested a net
$50 million reduction, beginning September 1, 2007, in credits to
customers for off-system sales margins as part of its July 2007 fuel
clause filing under the new re-regulation legislation.
|
(b)
|
Rate
increase is presently subject to refund. Proceeding is
on-going.
|
Operating
Company
|
Jurisdiction
|
Cost
Type
|
Request
|
Projected
Date of Rate Increase
|
|||||
(in
millions)
|
|||||||||
APCo
|
Virginia
|
Incremental
E&R
|
$
|
60
|
December
2007
|
||||
APCo
|
Virginia
|
Fuel,
Off-system Sales
|
33
|
September
2007
|
·
|
Generation
of electricity for sale to U.S. retail and wholesale
customers.
|
·
|
Electricity
transmission and distribution in the
U.S.
|
·
|
Barging
operations that annually transport approximately 34 million tons
of coal
and dry bulk commodities primarily on the Ohio, Illinois and lower
Mississippi rivers. Approximately 35% of the barging operations
relates to the transportation of coal, 30% relates to agricultural
products, 18% relates to steel and 17% relates to other
commodities.
|
·
|
IPPs,
wind farms and marketing and risk management activities primarily
in
ERCOT.
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(in
millions)
|
||||||||||||||||
Utility
Operations
|
$ |
238
|
$ |
159
|
$ |
491
|
$ |
524
|
||||||||
MEMCO
Operations
|
7
|
14
|
22
|
35
|
||||||||||||
Generation
and Marketing
|
15
|
2
|
14
|
6
|
||||||||||||
All
Other (a)
|
(3 | ) | (3 | ) |
1
|
(15 | ) | |||||||||
Income
Before Discontinued Operations
and
Extraordinary Loss
|
$ |
257
|
$ |
172
|
$ |
528
|
$ |
550
|
(a)
|
All
Other includes:
|
|
·
|
Parent’s
guarantee revenue received from affiliates, interest income and interest
expense and other nonallocated costs.
|
|
·
|
Other
energy supply related businesses, including the Plaquemine Cogeneration
Facility, which was sold in the fourth quarter of
2006.
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(in
millions)
|
||||||||||||||||
Revenues
|
$ |
2,954
|
$ |
2,796
|
$ |
5,987
|
$ |
5,762
|
||||||||
Fuel
and Purchased Power
|
1,109
|
1,123
|
2,228
|
2,249
|
||||||||||||
Gross
Margin
|
1,845
|
1,673
|
3,759
|
3,513
|
||||||||||||
Depreciation
and Amortization
|
365
|
346
|
748
|
686
|
||||||||||||
Other
Operating Expenses
|
957
|
983
|
1,948
|
1,819
|
||||||||||||
Operating
Income
|
523
|
344
|
1,063
|
1,008
|
||||||||||||
Other
Income, Net
|
27
|
44
|
45
|
85
|
||||||||||||
Interest
Charges and Preferred Stock Dividend
Requirements
|
207
|
161
|
386
|
315
|
||||||||||||
Income
Tax Expense
|
105
|
68
|
231
|
254
|
||||||||||||
Income
Before Discontinued Operations and
Extraordinary
Loss
|
$ |
238
|
$ |
159
|
$ |
491
|
$ |
524
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
Energy/Delivery
Summary
|
2007
|
2006
|
2007
|
2006
|
|||||||||
(in
millions of KWH)
|
|||||||||||||
Energy
|
|||||||||||||
Retail:
|
|||||||||||||
Residential
|
10,127
|
9,590
|
24,267
|
22,528
|
|||||||||
Commercial
|
10,227
|
9,440
|
19,586
|
18,349
|
|||||||||
Industrial
|
14,848
|
13,716
|
28,413
|
26,937
|
|||||||||
Miscellaneous
|
632
|
655
|
1,245
|
1,274
|
|||||||||
Total
Retail
|
35,834
|
33,401
|
73,511
|
69,088
|
|||||||||
Wholesale
|
9,376
|
10,822
|
18,154
|
21,667
|
|||||||||
Delivery
|
|||||||||||||
Texas
Wires – Energy delivered to customers served
by
AEP’s Texas Wires Companies
|
6,746
|
6,915
|
12,577
|
12,461
|
|||||||||
Total
KWHs
|
51,956
|
51,138
|
104,242
|
103,216
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||
(in
degree days)
|
||||||||||||
Weather
Summary
|
||||||||||||
Eastern
Region
|
||||||||||||
Actual
– Heating (a)
|
222
|
107
|
2,039
|
1,563
|
||||||||
Normal
– Heating (b)
|
174
|
175
|
1,966
|
1,992
|
||||||||
Actual
– Cooling (c)
|
367
|
228
|
382
|
229
|
||||||||
Normal
– Cooling (b)
|
275
|
279
|
278
|
282
|
||||||||
Western
Region (d)
|
||||||||||||
Actual
– Heating (a)
|
92
|
5
|
994
|
663
|
||||||||
Normal
– Heating (b)
|
33
|
33
|
991
|
1,005
|
||||||||
Actual
– Cooling (c)
|
622
|
815
|
678
|
858
|
||||||||
Normal
– Cooling (b)
|
656
|
652
|
674
|
669
|
(a)
|
Eastern
region and western region heating degree days are calculated on a
55
degree temperature base.
|
(b)
|
Normal
Heating/Cooling represents the thirty-year average of degree
days.
|
(c)
|
Eastern
region and western region cooling degree days are calculated on a
65
degree temperature base.
|
(d)
|
Western
region statistics represent PSO/SWEPCo customer base
only.
|
Second
Quarter of 2006
|
$ |
159
|
||||||
Changes
in Gross Margin:
|
||||||||
Retail
Margins
|
72
|
|||||||
Off-system
Sales
|
52
|
|||||||
Transmission
Revenues
|
22
|
|||||||
Other
Revenues
|
26
|
|||||||
Total
Change in Gross Margin
|
172
|
|||||||
Changes
in Operating Expenses and Other:
|
||||||||
Other
Operation and Maintenance
|
26
|
|||||||
Depreciation
and Amortization
|
(19 | ) | ||||||
Carrying
Costs Income
|
(17 | ) | ||||||
Interest
and Other Charges
|
(46 | ) | ||||||
Total
Change in Operating Expenses and Other
|
(56 | ) | ||||||
Income
Tax Expense
|
(37 | ) | ||||||
Second
Quarter of 2007
|
$ |
238
|
·
|
Retail
Margins increased $72 million primarily due to the
following:
|
|
·
|
A
$36 million increase related to new rates implemented in our Ohio
jurisdictions as approved by the PUCO in our RSP’s.
|
|
·
|
A
$36 million increase related to increased residential and commercial
usage
and customer growth.
|
|
·
|
A
$24 million increase related to Ormet, a new industrial customer
in
Ohio. See “Ormet” section of Note 3.
|
|
·
|
A
$19 million increase related to increased sales to municipal, cooperative
and other customers primarily resulting from new power supply
contracts.
|
|
·
|
A
$26 million increase in usage related to weather. As compared
to the prior year, our eastern region experienced a 61% increase
in
cooling degree days partially offset by a 24% decrease in cooling
degree
days in our western region.
|
|
These
increases were partially offset by:
|
||
·
|
A
$38 million net decrease related to the APCo Virginia base rate case
which
includes a second quarter 2007 provision for revenue refund as a
result of
the final order offset by the new rates implemented. See
“Virginia Base Rate Case” section of Note 3.
|
|
·
|
A
$25 million decrease due to a second quarter 2007 provision related
to a
SWEPCo Texas fuel reconciliation proceeding. See “SWEPCo Fuel
Reconciliation – Texas” section of Note 3.
|
|
·
|
A
$21 million decrease in financial transmission rights revenue, net
of
congestion, primarily due to fewer transmission constraints within
the PJM
market.
|
|
·
|
Margins
from Off-system Sales increased $52 million primarily due to higher
power
prices in the east and stronger trading margins offset by higher
internal
load and lower generation availability.
|
|
·
|
Transmission
Revenues increased $22 million primarily due to a provision recorded
in
the second quarter of 2006 related to potential SECA
refunds. See “Transmission Rate Proceedings at the FERC”
section of Note 3.
|
·
|
Other
Revenues increased $26 million primarily due to higher securitization
revenue at TCC resulting from the $1.7 billion securitization in
October
2006. Securitization revenue represents amounts collected to
recover securitization bond principal and interest payments related
to
TCC’s securitized transition assets and are fully offset by amortization
and interest expenses.
|
·
|
Other
Operation and Maintenance expenses decreased $26 million primarily
due to
reduced expenses for storm restoration and lower administrative and
general expenses.
|
·
|
Depreciation
and Amortization expense increased $19 million primarily due to increased
Ohio regulatory asset amortization related to recovery of IGCC
pre-construction costs, increased Texas amortization of the securitized
transition assets and higher depreciable property balances, offset
by
adjustments related to implementation of the final order in the APCo
Virginia base rate case.
|
·
|
Carrying
Costs Income decreased $17 million because TCC started recovering
stranded
costs in October 2006, thus eliminating future TCC carrying costs
income.
|
·
|
Interest
and Other Charges increased $46 million primarily due to additional
debt
issued in the fourth quarter of 2006 including TCC securitization
bonds.
|
·
|
Income
Tax Expense increased $37 million due to an increase in pretax
income.
|
Six
Months Ended June 30, 2006
|
$ |
524
|
||||||
Changes
in Gross Margin:
|
||||||||
Retail
Margins
|
210
|
|||||||
Off-system
Sales
|
11
|
|||||||
Transmission
Revenues
|
(8 | ) | ||||||
Other
Revenues
|
33
|
|||||||
Total
Change in Gross Margin
|
246
|
|||||||
Changes
in Operating Expenses and Other:
|
||||||||
Other
Operation and Maintenance
|
(85 | ) | ||||||
Gain
on Dispositions of Assets, Net
|
(47 | ) | ||||||
Depreciation
and Amortization
|
(62 | ) | ||||||
Taxes
Other Than Income Taxes
|
3
|
|||||||
Carrying
Costs Income
|
(39 | ) | ||||||
Other
Income, Net
|
(1 | ) | ||||||
Interest
and Other Charges
|
(71 | ) | ||||||
Total
Change in Operating Expenses and Other
|
(302 | ) | ||||||
Income
Tax Expense
|
23
|
|||||||
Six
Months Ended June 30, 2007
|
$ |
491
|
·
|
Retail
Margins increased $210 million primarily due to the
following:
|
|
·
|
A
$71 million increase related to new rates implemented in our Ohio
jurisdictions as approved by the PUCO in our RSPs and a $20 million
increase related to new rates implemented in other east jurisdictions
of
Kentucky, West Virginia and Virginia.
|
|
·
|
A
$70 million increase related to increased residential and commercial
usage
and customer growth.
|
|
·
|
A
$66 million increase in usage related to weather. As compared
to the prior year, our eastern region and western region experienced
30%
and 50% increases, respectively, in heating degree days. Also,
our eastern region experienced a 67% increase in cooling degree days
which
was offset by a 21% decrease in cooling degree days in our western
region.
|
|
·
|
A
$37 million increase related to Ormet, a new industrial customer
in
Ohio. See “Ormet” section of Note 3.
|
|
These
increases were partially offset by:
|
||
·
|
A
$48 million decrease in financial transmission rights revenue, net
of
congestion, primarily due to fewer transmission constraints within
the PJM
market.
|
|
·
|
A
$25 million decrease due to a second quarter 2007 provision related
to a
SWEPCo Texas fuel reconciliation proceeding. See “SWEPCo Fuel
Reconciliation – Texas” section of Note 3.
|
|
·
|
Margins
from Off-system Sales increased $11 million primarily due to higher
power
prices in the east and stronger trading margins offset by higher
internal
load and lower generation availability.
|
|
·
|
Transmission
Revenues decreased $8 million primarily due to the elimination of
SECA
revenues as of April 1, 2006 offset by a provision recorded in the
second
quarter of 2006 related to potential SECA
refunds. See “Transmission Rate Proceedings at the
FERC” section of Note 3.
|
|
·
|
Other
Revenues increased $33 million primarily due to higher securitization
revenue at TCC resulting from the $1.7 billion securitization in
October
2006. Securitization revenue represents amounts collected to
recover securitization bond principal and interest payments related
to
TCC’s securitized transition assets and are fully offset by amortization
and interest expenses.
|
·
|
Other
Operation and Maintenance expenses increased $85 million primarily
due to
increases in generation expenses related to plant outages, base operations
and removal costs and distribution expenses associated with service
reliability and storm restoration primarily in
Oklahoma.
|
·
|
Gain
on Disposition of Assets, Net decreased $47 million primarily related
to
the earnings sharing agreement with Centrica from the sale of our
REPs in
2002. In 2006, we received $70 million from Centrica for
earnings sharing and in 2007 we received $20 million as the earnings
sharing agreement ended.
|
·
|
Depreciation
and Amortization expense increased $62 million primarily due to increased
Ohio regulatory asset amortization related to recovery of IGCC
pre-construction costs, increased Texas amortization of the securitized
transition assets and higher depreciable property
balances.
|
·
|
Carrying
Costs Income decreased $39 million because TCC started recovering
stranded
costs in October 2006, thus eliminating future TCC carrying costs
income.
|
·
|
Interest
and Other Charges increased $71 million primarily due to additional
debt
issued in the fourth quarter of 2006 including TCC securitization
bonds.
|
·
|
Income
Tax Expense decreased $23 million due to a decrease in pretax
income.
|
June
30, 2007
|
December
31, 2006
|
|||||||||||||||
($
in millions)
|
||||||||||||||||
Long-term
Debt, Including Amounts Due Within One Year
|
$ |
14,588
|
59.0 | % | $ |
13,698
|
59.1 | % | ||||||||
Short-term
Debt
|
438
|
1.8
|
18
|
0.0
|
||||||||||||
Total
Debt
|
15,026
|
60.8
|
13,716
|
59.1
|
||||||||||||
Common
Equity
|
9,656
|
39.0
|
9,412
|
40.6
|
||||||||||||
Preferred
Stock
|
61
|
0.2
|
61
|
0.3
|
||||||||||||
Total
Debt and Equity Capitalization
|
$ |
24,743
|
100.0 | % | $ |
23,189
|
100.0 | % |
Amount
|
Maturity
|
||||||
(in
millions)
|
|||||||
Commercial
Paper Backup:
|
|||||||
Revolving
Credit Facility
|
$
|
1,500
|
March
2011
|
||||
Revolving
Credit Facility
|
1,500
|
April
2012
|
|||||
Total
|
3,000
|
||||||
Cash
and Cash Equivalents
|
172
|
||||||
Total
Liquidity Sources
|
3,172
|
||||||
Less:
AEP Commercial Paper Outstanding
|
416
|
||||||
Letters
of Credit Drawn
|
27
|
||||||
Net
Available Liquidity
|
$
|
2,729
|
Moody’s
|
S&P
|
Fitch
|
||||||||||||||||||||||
AEP
Short Term Debt
|
P-2
|
A-2
|
F-2
|
|||||||||||||||||||||
AEP
Senior Unsecured Debt
|
Baa2
|
BBB
|
BBB
|
Six
Months Ended
|
||||||||
June
30,
|
||||||||
2007
|
2006
|
|||||||
(in
millions)
|
||||||||
Cash
and Cash Equivalents at Beginning of Period
|
$ |
301
|
$ |
401
|
||||
Net
Cash Flows From Operating Activities
|
969
|
1,123
|
||||||
Net
Cash Flows Used For Investing Activities
|
(2,127 | ) |
(1,572
|
) | ||||
Net
Cash Flows From Financing Activities
|
1,029
|
297
|
||||||
Net
Decrease in Cash and Cash Equivalents
|
(129 | ) |
(152
|
) | ||||
Cash
and Cash Equivalents at End of Period
|
$ |
172
|
$ |
249
|
Six
Months Ended
|
||||||||
June
30,
|
||||||||
2007
|
2006
|
|||||||
(in
millions)
|
||||||||
Net
Income
|
$ |
451
|
$ |
556
|
||||
Less: Discontinued
Operations, Net of Tax
|
(2 | ) | (6 | ) | ||||
Income
Before Discontinued Operations
|
449
|
550
|
||||||
Noncash
Items Included in Earnings
|
938
|
617
|
||||||
Changes
in Assets and Liabilities
|
(418 | ) | (44 | ) | ||||
Net
Cash Flows From Operating Activities
|
$ |
969
|
$ |
1,123
|
Six
Months Ended
|
|||||||||
June
30,
|
|||||||||
2007
|
2006
|
||||||||
(in
millions)
|
|||||||||
Construction
Expenditures
|
$ | (1,823 | ) | $ |
(1,611
|
)
|
|||
Change
in Other Temporary Investments, Net
|
(129 | ) |
3
|
||||||
(Purchases)/Sales
of Investment Securities, Net
|
208
|
(51
|
)
|
||||||
Acquisition
of Darby and Lawrenceburg Plants
|
(427 | ) |
-
|
||||||
Proceeds
from Sales of Assets
|
74
|
118
|
|||||||
Other
|
(30 | ) |
(31
|
)
|
|||||
Net
Cash Flows Used For Investing Activities
|
$ | (2,127 | ) | $ |
(1,572
|
)
|
Six
Months Ended
|
|||||||||
June
30,
|
|||||||||
2007
|
2006
|
||||||||
(in
millions)
|
|||||||||
Issuance
of Common Stock
|
$ |
90
|
$ |
6
|
|||||
Issuance/Retirement
of Debt, Net
|
1,294
|
552
|
|||||||
Dividends
Paid on Common Stock
|
(311 | ) |
(291
|
)
|
|||||
Other
|
(44 | ) |
30
|
||||||
Net
Cash Flows From Financing Activities
|
$ |
1,029
|
$ |
297
|
June
30,
2007
|
December
31,
2006
|
|||||||
(in
millions)
|
||||||||
AEP
Credit Accounts Receivable Purchase Commitments
|
$ |
549
|
$ |
536
|
||||
Rockport
Plant Unit 2 Future Minimum Lease Payments
|
2,290
|
2,364
|
||||||
Railcars
Maximum Potential Loss From Lease Agreement
|
30
|
31
|
·
|
The
PUCT ruling that TCC did not comply with the Texas Restructuring
Legislation and PUCT rules regarding the required auction of 15%
of its
Texas jurisdictional installed capacity, which led to a significant
disallowance of capacity auction true-up revenues,
|
·
|
The
PUCT ruling that TCC acted in a manner that was commercially unreasonable,
because TCC failed to determine a minimum price at which it would
reject
bids for the sale of its nuclear generating plant and it bundled
out-of-the-money gas units with the sale of its coal unit, which
led to
the disallowance of a significant portion of TCC’s net stranded generation
plant cost, and
|
·
|
The
two federal matters regarding the allocation of off-system sales
related
to fuel recoveries and the potential tax normalization
violation.
|
·
|
Requirements
under the Clean Air Act (CAA) to reduce emissions of sulfur dioxide
(SO2),
nitrogen oxide (NOx),
particulate
matter (PM) and mercury from fossil fuel-fired power plants;
and
|
·
|
Requirements
under the Clean Water Act (CWA) to reduce the impacts of water intake
structures on aquatic species at certain of our power
plants.
|
Utility
Operations
|
Generation
and
Marketing
|
All
Other
|
Sub-Total
MTM Risk Management Contracts
|
PLUS:
MTM of Cash Flow and Fair Value Hedges
|
Total
|
|||||||||||||||||||
Current
Assets
|
$ |
305
|
$ |
40
|
$ |
83
|
$ |
428
|
$ |
39
|
$ |
467
|
||||||||||||
Noncurrent
Assets
|
197
|
46
|
98
|
341
|
15
|
356
|
||||||||||||||||||
Total
Assets
|
502
|
86
|
181
|
769
|
54
|
823
|
||||||||||||||||||
Current
Liabilities
|
(215 | ) | (50 | ) | (83 | ) | (348 | ) | (3 | ) | (351 | ) | ||||||||||||
Noncurrent
Liabilities
|
(91 | ) | (11 | ) | (105 | ) | (207 | ) | (1 | ) | (208 | ) | ||||||||||||
Total
Liabilities
|
(306 | ) | (61 | ) | (188 | ) | (555 | ) | (4 | ) | (559 | ) | ||||||||||||
Total
MTMDerivative Contract
Net
Assets (Liabilities)
|
$ |
196
|
$ |
25
|
$ | (7 | ) | $ |
214
|
$ |
50
|
$ |
264
|
Utility
Operations
|
Generation
and
Marketing
|
All
Other
|
Total
|
|||||||||||||
Total
MTM Risk Management Contract Net Assets
(Liabilities)
at December 31, 2006
|
$ |
236
|
$ |
2
|
$ | (5 | ) | $ |
233
|
|||||||
(Gain)
Loss from Contracts Realized/Settled
During
the Period and Entered in a Prior Period
|
(37 | ) | (1 | ) | (1 | ) | (39 | ) | ||||||||
Fair
Value of New Contracts at Inception When Entered
During the Period (a)
|
1
|
31
|
-
|
32
|
||||||||||||
Net
Option Premiums Paid/(Received) for Unexercised or
Unexpired Option
Contracts Entered During The Period
|
1
|
-
|
-
|
1
|
||||||||||||
Changes
in Fair Value Due to Valuation Methodology
Changes on Forward Contracts
|
-
|
-
|
-
|
-
|
||||||||||||
Changes
in Fair Value Due to Market Fluctuations During
the Period (b)
|
8
|
(7 | ) | (1 | ) |
-
|
||||||||||
Changes
in Fair Value Allocated to Regulated Jurisdictions
(c)
|
(13 | ) |
-
|
-
|
(13 | ) | ||||||||||
Total
MTM Risk Management Contract Net Assets
(Liabilities) at June 30, 2007
|
$ |
196
|
$ |
25
|
$ | (7 | ) |
214
|
||||||||
Net
Cash Flow and Fair Value
Hedge Contracts
|
50
|
|||||||||||||||
Total
MTM Risk Management Contract Net Assets at
June 30, 2007
|
$ |
264
|
(a)
|
Reflects
fair value on long-term contracts which are typically with customers
that
seek fixed pricing to limit their risk against fluctuating energy
prices. Inception value is only recorded if observable market
data can be obtained for valuation inputs for the entire contract
term. The contract prices are valued against market curves
associated with the delivery location and delivery
term.
|
(b)
|
Market
fluctuations are attributable to various factors such as supply/demand,
weather, storage, etc.
|
(c)
|
“Change
in Fair Value Allocated to Regulated Jurisdictions” relates to the net
gains (losses) of those contracts that are not reflected on the Condensed
Consolidated Statements of Income. These net gains (losses) are
recorded as regulatory assets/liabilities for those subsidiaries
that
operate in regulated jurisdictions.
|
·
|
The
method of measuring fair value used in determining the carrying amount
of
our total MTM asset or liability (external sources or modeled
internally).
|
·
|
The
maturity, by year, of our net assets/liabilities, to give an indication
of
when these MTM amounts will settle and generate
cash.
|
Remainder
2007
|
2008
|
2009
|
2010
|
2011
|
After
2011
(c)
|
Total
|
||||||||||||||||||||||
Utility
Operations:
|
||||||||||||||||||||||||||||
Prices
Actively Quoted – Exchange Traded Contracts
|
$ | (6 | ) | $ | (8 | ) | $ |
-
|
$ |
-
|
$ |
-
|
$ |
-
|
$ | (14 | ) | |||||||||||
Prices
Provided by Other External
Sources
– OTC Broker Quotes (a)
|
73
|
56
|
37
|
17
|
-
|
-
|
183
|
|||||||||||||||||||||
Prices
Based on Models and Other
Valuation
Methods (b)
|
(4 | ) | (3 | ) |
8
|
17
|
4
|
5
|
27
|
|||||||||||||||||||
Total
|
63
|
45
|
45
|
34
|
4
|
5
|
196
|
|||||||||||||||||||||
Generation
and Marketing:
|
||||||||||||||||||||||||||||
Prices
Actively Quoted – Exchange Traded Contracts
|
(8 | ) | (2 | ) |
2
|
-
|
-
|
-
|
(8 | ) | ||||||||||||||||||
Prices
Provided by Other External
Sources
– OTC Broker Quotes (a)
|
(5 | ) |
8
|
3
|
-
|
-
|
-
|
6
|
||||||||||||||||||||
Prices
Based on Models and Other
Valuation
Methods (b)
|
1
|
2
|
(3 | ) |
6
|
5
|
16
|
27
|
||||||||||||||||||||
Total
|
(12 | ) |
8
|
2
|
6
|
5
|
16
|
25
|
||||||||||||||||||||
All
Other:
|
||||||||||||||||||||||||||||
Prices
Actively Quoted – Exchange Traded Contracts
|
2
|
-
|
-
|
-
|
-
|
-
|
2
|
|||||||||||||||||||||
Prices
Provided by Other External
Sources
– OTC Broker Quotes (a)
|
(1 | ) |
-
|
-
|
-
|
-
|
-
|
(1 | ) | |||||||||||||||||||
Prices
Based on Models and Other
Valuation
Methods (b)
|
(1 | ) | (1 | ) | (4 | ) | (4 | ) |
2
|
-
|
(8 | ) | ||||||||||||||||
Total
|
-
|
(1 | ) | (4 | ) | (4 | ) |
2
|
-
|
(7 | ) | |||||||||||||||||
Total:
|
||||||||||||||||||||||||||||
Prices
Actively Quoted – Exchange
Traded
Contracts
|
(12 | ) | (10 | ) |
2
|
-
|
-
|
-
|
(20 | ) | ||||||||||||||||||
Prices
Provided by Other External
Sources
– OTC Broker Quotes (a)
|
67
|
64
|
40
|
17
|
-
|
-
|
188
|
|||||||||||||||||||||
Prices
Based on Models and Other
Valuation
Methods (b)
|
(4 | ) | (2 | ) |
1
|
19
|
11
|
21
|
46
|
|||||||||||||||||||
Total
|
$ |
51
|
$ |
52
|
$ |
43
|
$ |
36
|
$ |
11
|
$ |
21
|
$ |
214
|
(a)
|
Prices
Provided by Other External Sources – OTC Broker Quotes reflects
information obtained from over-the-counter brokers (OTC), industry
services, or multiple-party online platforms.
|
(b)
|
Prices
Based on Models and Other Valuation Methods is used in the absence
of
independent information from external sources. Modeled
information is derived using valuation models developed by the reporting
entity, reflecting when appropriate, option pricing theory, discounted
cash flow concepts, valuation adjustments, etc. and may require projection
of prices for underlying commodities beyond the period that prices
are
available from third-party sources. In addition, where external
pricing information or market liquidity is limited, such valuations
are
classified as modeled. Contract values that are measured using
models or valuation methods other than active quotes or OTC broker
quotes
(because of the lack of such data for all delivery quantities, locations
and periods) incorporate in the model or other valuation methods,
to the
extent possible, OTC broker quotes and active quotes for deliveries
in
years and at locations for which such quotes are available including
values determinable by other third party transactions.
|
(c)
|
There
is mark-to-market value of $21 million in individual periods beyond
2011. $10 million of this mark-to-market value is in 2012, $5
million is in 2013, and $5 million is in 2014, and $1 million for
years
2015 through 2017.
|
Commodity
|
Transaction
Class
|
Market/Region
|
Tenor
|
|||
(in
Months)
|
||||||
Natural
Gas
|
Futures
|
NYMEX
/ Henry Hub
|
60
|
|||
Physical
Forwards
|
Gulf
Coast, Texas
|
16
|
||||
Swaps
|
Northeast,
Mid-Continent, Gulf Coast, Texas
|
16
|
||||
Exchange
Option Volatility
|
NYMEX
/ Henry Hub
|
12
|
||||
Power
|
Futures
|
AEP
East - PJM
|
30
|
|||
Physical
Forwards
|
AEP
East
|
42
|
||||
Physical
Forwards
|
AEP
West
|
18
|
||||
Physical
Forwards
|
West
Coast
|
30
|
||||
Peak
Power Volatility (Options)
|
AEP
East - Cinergy, PJM
|
12
|
||||
Emissions
|
Credits
|
SO2,
NOx
|
30
|
|||
Coal
|
Physical
Forwards
|
PRB,
NYMEX, CSX
|
30
|
Power
|
Interest
Rate and
Foreign
Currency
|
Total
|
||||||||||
Beginning
Balance in AOCI, December 31, 2006
|
$ |
17
|
$ | (23 | ) | $ | (6 | ) | ||||
Changes
in Fair Value
|
22
|
5
|
27
|
|||||||||
Reclassifications
from AOCI to Net Income for
Cash
Flow Hedges Settled
|
(13 | ) |
1
|
(12 | ) | |||||||
Ending
Balance in AOCI, June 30, 2007
|
$ |
26
|
$ | (17 | ) | $ |
9
|
|||||
After
Tax Portion Expected to be Reclassified
to
Earnings During Next 12 Months
|
$ |
20
|
$ |
-
|
$ |
20
|
Counterparty
Credit Quality
|
Exposure
Before Credit Collateral
|
Credit
Collateral
|
Net
Exposure
|
Number
of Counterparties>10% of
Net
Exposure
|
Net
Exposure of Counterparties>10%
|
|||||||||||||||
Investment
Grade
|
$ |
723
|
$ |
81
|
$ |
642
|
1
|
$ |
67
|
|||||||||||
Split
Rating
|
20
|
2
|
18
|
3
|
17
|
|||||||||||||||
Noninvestment
Grade
|
30
|
7
|
23
|
1
|
19
|
|||||||||||||||
No
External Ratings:
|
||||||||||||||||||||
Internal
Investment Grade
|
71
|
-
|
71
|
1
|
30
|
|||||||||||||||
Internal
Noninvestment Grade
|
17
|
2
|
15
|
1
|
11
|
|||||||||||||||
Total
as of June 30, 2007
|
$ |
861
|
$ |
92
|
$ |
769
|
7
|
$ |
144
|
|||||||||||
Total
as of December 31, 2006
|
$ |
998
|
$ |
161
|
$ |
837
|
9
|
$ |
169
|
Remainder
|
|||||
2007
|
2008
|
2009
|
|||
Estimated
Plant Output Hedged
|
94%
|
90%
|
91%
|
Six
Months Ended
June
30, 2007
|
Twelve
Months Ended
December
31, 2006
|
||||||||||||||||
(in
millions)
|
(in
millions)
|
||||||||||||||||
End
|
High
|
Average
|
Low
|
End
|
High
|
Average
|
Low
|
||||||||||
$1
|
$6
|
$2
|
$1
|
$3
|
$10
|
$3
|
$1
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
REVENUES
|
||||||||||||||||
Utility
Operations
|
$ |
2,818
|
$ |
2,799
|
$ |
5,704
|
$ |
5,781
|
||||||||
Other
|
328
|
137
|
611
|
263
|
||||||||||||
TOTAL
|
3,146
|
2,936
|
6,315
|
6,044
|
||||||||||||
EXPENSES
|
||||||||||||||||
Fuel
and Other Consumables Used for Electric Generation
|
868
|
888
|
1,754
|
1,849
|
||||||||||||
Purchased
Energy for Resale
|
291
|
237
|
537
|
403
|
||||||||||||
Other
Operation and Maintenance
|
881
|
896
|
1,819
|
1,717
|
||||||||||||
Gain
on Disposition of Assets, Net
|
(3 | ) |
-
|
(26 | ) | (68 | ) | |||||||||
Depreciation
and Amortization
|
372
|
354
|
763
|
702
|
||||||||||||
Taxes
Other Than Income Taxes
|
188
|
190
|
374
|
381
|
||||||||||||
TOTAL
|
2,597
|
2,565
|
5,221
|
4,984
|
||||||||||||
OPERATING
INCOME
|
549
|
371
|
1,094
|
1,060
|
||||||||||||
Interest
and Investment Income
|
8
|
11
|
31
|
19
|
||||||||||||
Carrying
Costs Income
|
16
|
33
|
24
|
63
|
||||||||||||
Allowance
For Equity Funds Used During Construction
|
6
|
7
|
14
|
13
|
||||||||||||
Gain
on Disposition of Equity Investments, Net
|
-
|
-
|
-
|
3
|
||||||||||||
INTEREST
AND OTHER CHARGES
|
||||||||||||||||
Interest
Expense
|
213
|
176
|
399
|
344
|
||||||||||||
Preferred
Stock Dividend Requirements of Subsidiaries
|
-
|
-
|
1
|
1
|
||||||||||||
TOTAL
|
213
|
176
|
400
|
345
|
||||||||||||
INCOME
BEFORE INCOME TAX EXPENSE, MINORITY
INTEREST
EXPENSE AND EQUITY EARNINGS (LOSS)
|
366
|
246
|
763
|
813
|
||||||||||||
Income
Tax Expense
|
108
|
72
|
238
|
261
|
||||||||||||
Minority
Interest Expense
|
1
|
1
|
2
|
1
|
||||||||||||
Equity
Earnings (Loss) of Unconsolidated Subsidiaries
|
-
|
(1 | ) |
5
|
(1 | ) | ||||||||||
INCOME
BEFORE DISCONTINUED OPERATIONS AND
EXTRAORDINARY
LOSS
|
257
|
172
|
528
|
550
|
||||||||||||
DISCONTINUED
OPERATIONS, NET OF TAX
|
2
|
3
|
2
|
6
|
||||||||||||
INCOME
BEFORE EXTRAORDINARY LOSS
|
259
|
175
|
530
|
556
|
||||||||||||
EXTRAORDINARY
LOSS, NET OF TAX
|
(79 | ) |
-
|
(79 | ) |
-
|
||||||||||
NET
INCOME
|
$ |
180
|
$ |
175
|
$ |
451
|
$ |
556
|
||||||||
WEIGHTED
AVERAGE NUMBER OF BASIC SHARES OUTSTANDING
|
398,679,242
|
393,722,353
|
398,000,712
|
393,687,949
|
||||||||||||
BASIC
EARNINGS PER SHARE
|
||||||||||||||||
Income
Before Discontinued Operations and Extraordinary Loss
|
$ |
0.64
|
$ |
0.44
|
$ |
1.33
|
$ |
1.40
|
||||||||
Discontinued
Operations, Net of Tax
|
0.01
|
-
|
-
|
0.01
|
||||||||||||
Income
Before Extraordinary Loss
|
0.65
|
0.44
|
1.33
|
1.41
|
||||||||||||
Extraordinary
Loss, Net of Tax
|
(0.20 | ) |
-
|
(0.20 | ) |
-
|
||||||||||
TOTAL
BASIC EARNINGS PER SHARE
|
$ |
0.45
|
$ |
0.44
|
$ |
1.13
|
$ |
1.41
|
||||||||
WEIGHTED
AVERAGE NUMBER OF DILUTED SHARES OUTSTANDING
|
399,868,900
|
395,500,506
|
399,214,277
|
395,540,498
|
||||||||||||
DILUTED
EARNINGS PER SHARE
|
||||||||||||||||
Income
Before Discontinued Operations and Extraordinary Loss
|
$ |
0.64
|
$ |
0.43
|
$ |
1.32
|
$ |
1.39
|
||||||||
Discontinued
Operations, Net of Tax
|
0.01
|
0.01
|
0.01
|
0.02
|
||||||||||||
Income
Before Extraordinary Loss
|
0.65
|
0.44
|
1.33
|
1.41
|
||||||||||||
Extraordinary
Loss, Net of Tax
|
(0.20 | ) |
-
|
(0.20 | ) |
-
|
||||||||||
TOTAL
DILUTED EARNINGS PER SHARE
|
$ |
0.45
|
$ |
0.44
|
$ |
1.13
|
$ |
1.41
|
||||||||
CASH
DIVIDENDS PAID PER SHARE
|
$ |
0.39
|
$ |
0.37
|
$ |
0.78
|
$ |
0.74
|
2007
|
2006
|
|||||||
CURRENT
ASSETS
|
||||||||
Cash
and Cash Equivalents
|
$ |
172
|
$ |
301
|
||||
Other
Temporary Investments
|
337
|
425
|
||||||
Accounts
Receivable:
|
||||||||
Customers
|
676
|
676
|
||||||
Accrued
Unbilled Revenues
|
378
|
350
|
||||||
Miscellaneous
|
58
|
44
|
||||||
Allowance for Uncollectible Accounts
|
(40 | ) |
(30
|
)
|
||||
Total Accounts Receivable
|
1,072
|
1,040
|
||||||
Fuel,
Materials and Supplies
|
1,038
|
913
|
||||||
Risk
Management Assets
|
467
|
680
|
||||||
Regulatory
Asset for Under-Recovered Fuel Costs
|
28
|
38
|
||||||
Margin
Deposits
|
75
|
120
|
||||||
Prepayments
and Other
|
74
|
71
|
||||||
TOTAL
|
3,263
|
3,588
|
||||||
PROPERTY,
PLANT AND EQUIPMENT
|
||||||||
Electric:
|
||||||||
Production
|
19,618
|
16,787
|
||||||
Transmission
|
7,275
|
7,018
|
||||||
Distribution
|
11,718
|
11,338
|
||||||
Other
(including coal mining and nuclear fuel)
|
3,320
|
3,405
|
||||||
Construction
Work in Progress
|
2,469
|
3,473
|
||||||
Total
|
44,400
|
42,021
|
||||||
Accumulated
Depreciation and Amortization
|
(15,933 | ) |
(15,240
|
)
|
||||
TOTAL
- NET
|
28,467
|
26,781
|
||||||
OTHER
NONCURRENT ASSETS
|
||||||||
Regulatory
Assets
|
2,405
|
2,477
|
||||||
Securitized
Transition Assets
|
2,116
|
2,158
|
||||||
Spent
Nuclear Fuel and Decommissioning Trusts
|
1,311
|
1,248
|
||||||
Goodwill
|
76
|
76
|
||||||
Long-term
Risk Management Assets
|
356
|
378
|
||||||
Employee
Benefits and Pension Assets
|
303
|
327
|
||||||
Deferred
Charges and Other
|
896
|
910
|
||||||
TOTAL
|
7,463
|
7,574
|
||||||
Assets
Held for Sale
|
-
|
44
|
||||||
TOTAL
ASSETS
|
$ |
39,193
|
$ |
37,987
|
2007
|
2006
|
|||||||||||||
CURRENT
LIABILITIES
|
(in
millions)
|
|||||||||||||
Accounts
Payable
|
$
|
1,189
|
$
|
1,360
|
||||||||||
Short-term
Debt
|
438
|
18
|
||||||||||||
Long-term
Debt Due Within One Year
|
1,521
|
1,269
|
||||||||||||
Risk
Management Liabilities
|
351
|
541
|
||||||||||||
Customer
Deposits
|
353
|
339
|
||||||||||||
Accrued
Taxes
|
783
|
781
|
||||||||||||
Accrued
Interest
|
291
|
186
|
||||||||||||
Other
|
878
|
962
|
||||||||||||
TOTAL
|
5,804
|
5,456
|
||||||||||||
NONCURRENT
LIABILITIES
|
||||||||||||||
Long-term
Debt
|
13,067
|
12,429
|
||||||||||||
Long-term
Risk Management Liabilities
|
208
|
260
|
||||||||||||
Deferred
Income Taxes
|
4,536
|
4,690
|
||||||||||||
Regulatory
Liabilities and Deferred Investment Tax Credits
|
2,936
|
2,910
|
||||||||||||
Asset
Retirement Obligations
|
1,047
|
1,023
|
||||||||||||
Employee
Benefits and Pension Obligations
|
838
|
823
|
||||||||||||
Deferred
Gain on Sale and Leaseback – Rockport Plant Unit 2
|
143
|
148
|
||||||||||||
Deferred
Credits and Other
|
897
|
775
|
||||||||||||
TOTAL
|
23,672
|
23,058
|
||||||||||||
TOTAL
LIABILITIES
|
29,476
|
28,514
|
||||||||||||
Cumulative
Preferred Stock Not Subject to Mandatory Redemption
|
61
|
61
|
||||||||||||
Commitments
and Contingencies (Note 4)
|
||||||||||||||
COMMON
SHAREHOLDERS’ EQUITY
|
||||||||||||||
Common
Stock Par Value $6.50:
|
||||||||||||||
2007
|
2006
|
|||||||||||||
Shares
Authorized
|
600,000,000
|
600,000,000
|
||||||||||||
Shares
Issued
|
420,689,766
|
418,174,728
|
||||||||||||
(21,499,992
shares were held in treasury at June 30, 2007 and December 31,
2006)
|
2,734
|
2,718
|
||||||||||||
Paid-in
Capital
|
4,305
|
4,221
|
||||||||||||
Retained
Earnings
|
2,819
|
2,696
|
||||||||||||
Accumulated
Other Comprehensive Income (Loss)
|
(202
|
)
|
(223
|
)
|
||||||||||
TOTAL
|
9,656
|
9,412
|
||||||||||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
39,193
|
$
|
37,987
|
2007
|
2006
|
|||||||
OPERATING
ACTIVITIES
|
||||||||
Net
Income
|
$ |
451
|
$ |
556
|
||||
Less: Discontinued
Operations, Net of Tax
|
(2 | ) | (6 | ) | ||||
Income
Before Discontinued Operations
|
449
|
550
|
||||||
Adjustments
for Noncash Items:
|
||||||||
Depreciation
and Amortization
|
763
|
702
|
||||||
Deferred
Income Taxes
|
(24 | ) |
10
|
|||||
Deferred
Investment Tax Credits
|
(13 | ) | (14 | ) | ||||
Extraordinary
Loss
|
79
|
-
|
||||||
Regulatory
Provision
|
105
|
-
|
||||||
Carrying
Costs Income
|
(24 | ) | (63 | ) | ||||
Mark-to-Market
of Risk Management Contracts
|
19
|
(43 | ) | |||||
Amortization
of Nuclear Fuel
|
33
|
25
|
||||||
Deferred
Property Taxes
|
24
|
12
|
||||||
Fuel
Over/Under-Recovery, Net
|
(101 | ) |
128
|
|||||
Gain
on Sales of Assets and Equity Investments, Net
|
(26 | ) | (71 | ) | ||||
Change
in Other Noncurrent Assets
|
(53 | ) |
82
|
|||||
Change
in Other Noncurrent Liabilities
|
23
|
(12 | ) | |||||
Changes
in Certain Components of Working Capital:
|
||||||||
Accounts
Receivable, Net
|
(81 | ) |
202
|
|||||
Fuel,
Materials and Supplies
|
(90 | ) | (140 | ) | ||||
Margin
Deposits
|
45
|
67
|
||||||
Accounts
Payable
|
(58 | ) | (17 | ) | ||||
Customer
Deposits
|
14
|
(189 | ) | |||||
Accrued
Taxes, Net
|
49
|
90
|
||||||
Accrued
Interest
|
67
|
1
|
||||||
Other
Current Assets
|
(21 | ) |
19
|
|||||
Other
Current Liabilities
|
(210 | ) | (216 | ) | ||||
Net
Cash Flows From Operating Activities
|
969
|
1,123
|
||||||
INVESTING
ACTIVITIES
|
||||||||
Construction
Expenditures
|
(1,823 | ) | (1,611 | ) | ||||
Change
in Other Temporary Investments, Net
|
(129 | ) |
3
|
|||||
Purchases
of Investment Securities
|
(6,827 | ) | (5,647 | ) | ||||
Sales
of Investment Securities
|
7,035
|
5,596
|
||||||
Acquisition
of Darby and Lawrenceburg Plants
|
(427 | ) |
-
|
|||||
Proceeds
from Sales of Assets
|
74
|
118
|
||||||
Other
|
(30 | ) | (31 | ) | ||||
Net
Cash Flows Used For Investing Activities
|
(2,127 | ) | (1,572 | ) | ||||
FINANCING
ACTIVITIES
|
||||||||
Issuance
of Common Stock
|
90
|
6
|
||||||
Change
in Short-term Debt, Net
|
420
|
147
|
||||||
Issuance
of Long-term Debt
|
1,064
|
1,081
|
||||||
Retirement
of Long-term Debt
|
(190 | ) | (676 | ) | ||||
Dividends
Paid on Common Stock
|
(311 | ) | (291 | ) | ||||
Other
|
(44 | ) |
30
|
|||||
Net
Cash Flows From Financing Activities
|
1,029
|
297
|
||||||
Net
Decrease in Cash and Cash Equivalents
|
(129 | ) | (152 | ) | ||||
Cash
and Cash Equivalents at Beginning of Period
|
301
|
401
|
||||||
Cash
and Cash Equivalents at End of Period
|
$ |
172
|
$ |
249
|
||||
SUPPLEMENTARY
INFORMATION
|
||||||||
Cash
Paid for Interest, Net of Capitalized Amounts
|
$ |
304
|
$ |
316
|
||||
Net
Cash Paid for Income Taxes
|
128
|
123
|
||||||
Noncash
Acquisitions Under Capital Leases
|
23
|
37
|
||||||
Construction
Expenditures Included in Accounts Payable at June 30,
|
295
|
273
|
||||||
Acquisition
of Nuclear Fuel in Accounts Payable at June 30,
|
31
|
26
|
||||||
Noncash
Assumption of Liabilities Related to Acquisitions
|
5
|
-
|
||||||
See
Condensed Notes to Condensed Consolidated Financial
Statements.
|
Common
Stock
|
||||||||||||||||||||||||
Shares
|
Amount
|
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other Comprehensive Income (Loss)
|
Total
|
|||||||||||||||||||
DECEMBER
31, 2005
|
415
|
$ |
2,699
|
$ |
4,131
|
$ |
2,285
|
$ | (27 | ) | $ |
9,088
|
||||||||||||
Issuance
of Common Stock
|
1
|
5
|
6
|
|||||||||||||||||||||
Common
Stock Dividends
|
(291 | ) | (291 | ) | ||||||||||||||||||||
Other
|
2
|
2
|
||||||||||||||||||||||
TOTAL
|
8,805
|
|||||||||||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||||||||||
Other
Comprehensive Income, Net of Tax:
|
||||||||||||||||||||||||
Cash
Flow Hedges, Net of Tax of $29
|
54
|
54
|
||||||||||||||||||||||
Securities
Available for Sale, Net of Tax of $6
|
11
|
11
|
||||||||||||||||||||||
NET
INCOME
|
556
|
556
|
||||||||||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
621
|
|||||||||||||||||||||||
JUNE
30, 2006
|
415
|
$ |
2,700
|
$ |
4,138
|
$ |
2,550
|
$ |
38
|
$ |
9,426
|
|||||||||||||
DECEMBER
31, 2006
|
418
|
$ |
2,718
|
$ |
4,221
|
$ |
2,696
|
$ | (223 | ) | $ |
9,412
|
||||||||||||
FIN
48 Adoption, Net of Tax
|
(17 | ) | (17 | ) | ||||||||||||||||||||
Issuance
of Common Stock
|
3
|
16
|
74
|
90
|
||||||||||||||||||||
Common
Stock Dividends
|
(311 | ) | (311 | ) | ||||||||||||||||||||
Other
|
10
|
10
|
||||||||||||||||||||||
TOTAL
|
9,184
|
|||||||||||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||||||||||
Other
Comprehensive Income (Loss), Net of Tax:
|
||||||||||||||||||||||||
Cash
Flow Hedges, Net of Tax of $8
|
15
|
15
|
||||||||||||||||||||||
Securities
Available for Sale, Net of Tax of $3
|
(5 | ) | (5 | ) | ||||||||||||||||||||
SFAS
158 Costs Established as a Regulatory Asset for the Reapplication of
SFAS 71, Net of Tax of $6
|
11
|
11
|
||||||||||||||||||||||
NET
INCOME
|
451
|
451
|
||||||||||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
472
|
|||||||||||||||||||||||
JUNE
30, 2007
|
421
|
$ |
2,734
|
$ |
4,305
|
$ |
2,819
|
$ | (202 | ) | $ |
9,656
|
1.
|
Significant
Accounting Matters
|
2.
|
New
Accounting Pronouncements and Extraordinary Item
|
3.
|
Rate
Matters
|
4.
|
Commitments,
Guarantees and Contingencies
|
5.
|
Acquisitions,
Dispositions, Discontinued Operations and Assets Held for
Sale
|
6.
|
Benefit
Plans
|
7.
|
Business
Segments
|
8.
|
Income
Taxes
|
9.
|
Financing
Activities
|
1.
|
SIGNIFICANT
ACCOUNTING MATTERS
|
June
30,
|
December
31,
|
||||||||
2007
|
2006
|
||||||||
Components
|
(in
millions)
|
||||||||
Securities
Available for Sale, Net of Tax
|
$ |
13
|
$ |
18
|
|||||
Cash
Flow Hedges, Net of Tax
|
9
|
(6
|
)
|
||||||
SFAS
158 Costs, Net of Tax
|
(224 | ) |
(235
|
)
|
|||||
Total
|
$ | (202 | ) | $ |
(223
|
)
|
Three
Months Ended June 30,
|
||||||||||||||||
2007
|
2006
|
|||||||||||||||
(in
millions, except per share data)
|
||||||||||||||||
$/share
|
$/share
|
|||||||||||||||
Earnings
Applicable to Common Stock
|
$ |
180
|
$ |
175
|
||||||||||||
Average
Number of Basic Shares Outstanding
|
398.7
|
$ |
0.45
|
393.7
|
$ |
0.44
|
||||||||||
Average
Dilutive Effect of:
|
||||||||||||||||
Performance
Share Units
|
0.6
|
-
|
1.4
|
-
|
||||||||||||
Stock
Options
|
0.4
|
-
|
0.2
|
-
|
||||||||||||
Restricted
Stock Units
|
0.1
|
-
|
0.1
|
-
|
||||||||||||
Restricted
Shares
|
0.1
|
-
|
0.1
|
-
|
||||||||||||
Average
Number of Diluted Shares Outstanding
|
399.9
|
$ |
0.45
|
395.5
|
$ |
0.44
|
Six
Months Ended June 30,
|
||||||||||||||||
2007
|
2006
|
|||||||||||||||
(in
millions, except per share data)
|
||||||||||||||||
$/share
|
$/share
|
|||||||||||||||
Earnings
Applicable to Common Stock
|
$ |
451
|
$ |
556
|
||||||||||||
Average
Number of Basic Shares Outstanding
|
398.0
|
$ |
1.13
|
393.7
|
$ |
1.41
|
||||||||||
Average
Dilutive Effect of:
|
||||||||||||||||
Performance
Share Units
|
0.6
|
-
|
1.4
|
-
|
||||||||||||
Stock
Options
|
0.4
|
-
|
0.2
|
-
|
||||||||||||
Restricted
Stock Units
|
0.1
|
-
|
0.1
|
-
|
||||||||||||
Restricted
Shares
|
0.1
|
-
|
0.1
|
-
|
||||||||||||
Average
Number of Diluted Shares Outstanding
|
399.2
|
$ |
1.13
|
395.5
|
$ |
1.41
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Related
Party Transactions
|
(in
millions)
|
(in
millions)
|
||||||||||||||
AEP
Consolidated Purchased Energy:
|
||||||||||||||||
Ohio
Valley Electric Corporation (43.47% Owned)
|
$ |
56
|
$ |
58
|
$ |
105
|
$ |
113
|
||||||||
Sweeny
Cogeneration Limited Partnership (50% Owned)
|
29
|
28
|
59
|
62
|
||||||||||||
AEP
Consolidated Other Revenues – Barging and Other Transportation
Services – Ohio Valley Electric Corporation (43.47%
Owned)
|
8
|
8
|
17
|
15
|
||||||||||||
AEP
Consolidated Revenues – Utility Operations:
|
||||||||||||||||
Power
Pool Purchases – Ohio Valley Electric Corporation
(43.47%
Owned)
|
(4 | ) |
-
|
(4 | ) |
-
|
2.
|
NEW
ACCOUNTING PRONOUNCEMENTS AND EXTRAORDINARY
ITEM
|
3.
|
RATE
MATTERS
|
·
|
The
PUCT ruling that TCC did not comply with the Texas Restructuring
Legislation and PUCT rules regarding the required auction of 15%
of its
Texas jurisdictional installed capacity, which led to a significant
disallowance of capacity auction true-up revenues,
|
·
|
The
PUCT ruling that TCC acted in a manner that was commercially unreasonable,
because TCC failed to determine a minimum price at which it would
reject
bids for the sale of its nuclear generating plant and it bundled
out-of-the-money gas units with the sale of its coal unit, which
led to
the disallowance of a significant portion of TCC’s net stranded generation
plant cost, and
|
·
|
The
two federal matters regarding the allocation of off-system sales
related
to fuel recoveries and the potential tax normalization
violation. See “TCC Deferred Investment Tax Credits and Excess
Deferred Federal Income Taxes” and “TCC and TNC Deferred Fuel ” sections
below.
|
·
|
AEP/AP
proposed a Highway/Byway rate design in which:
|
|
·
|
The
cost of all transmission facilities in the PJM region operated at
345 kV
or higher would be included in a “Highway” rate that all load serving
entities (LSEs) would pay based on peak demand. The AEP/AP
proposal would produce about $125 million in net revenues per year
for AEP
from users in other zones of PJM.
|
|
·
|
The
cost of transmission facilities operating at lower voltages would
be
collected in the zones where those costs are presently charged under
PJM’s
existing rate design.
|
|
·
|
Two
other utilities, Baltimore Gas & Electric Company (BG&E) and Old
Dominion Electric Cooperative (ODEC), proposed a Highway/Byway rate
that
includes transmission facilities above 200 kV in the Highway rate,
which
would have produced lower net revenues for AEP than the AEP/AP
proposal.
|
|
·
|
In
another competing Highway/Byway proposal, a group of LSEs proposed
rates
that would include existing 500 kV and higher voltage facilities
and new
facilities above 200 kV in the Highway rate, which would also have
produced lower net revenues for AEP than the AEP/AP
proposal.
|
|
·
|
In
January 2006, the FERC staff issued testimony and exhibits supporting
phase-in of a PJM-wide flat rate or “Postage Stamp” type of rate design
that would socialize the cost of all transmission facilities. The
proposed
rate design would have initially produced much lower net transmission
revenues for AEP than the AEP/AP proposal, but could produce slightly
higher net revenues when fully phased
in.
|
4.
|
COMMITMENTS,
GUARANTEES AND
CONTINGENCIES
|
5.
|
ACQUISITIONS,
DISPOSITIONS, DISCONTINUED OPERATIONS AND ASSETS HELD FOR
SALE
|
U.K.
Generation
(a)
|
||||
Three
Months Ended June 30,
|
(in
millions)
|
|||
2007
Revenue
|
$
|
-
|
||
2007
Pretax Income
|
3
|
|||
2007
Earnings, Net of Tax
|
2
|
|||
2006
Revenue
|
$
|
-
|
||
2006
Pretax Income
|
4
|
|||
2006
Earnings, Net of Tax
|
3
|
U.K.
Generation
(a)
|
||||
Six
Months Ended June 30,
|
(in
millions)
|
|||
2007
Revenue
|
$
|
-
|
||
2007
Pretax Income
|
3
|
|||
2007
Earnings, Net of Tax
|
2
|
|||
2006
Revenue
|
$
|
-
|
||
2006
Pretax Income
|
9
|
|||
2006
Earnings, Net of Tax
|
6
|
(a)
|
The
2007 amounts relate to tax adjustments from the sale. Amounts
in 2006 relate to a release of accrued liabilities for the settlement
of
the London office lease and tax adjustments related to the
sale.
|
June
30,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
Texas
Plants
|
(in
millions)
|
|||||||
Other
Current Assets
|
$ |
-
|
$ |
1
|
||||
Property,
Plant and Equipment, Net
|
-
|
43
|
||||||
Total
Assets Held for Sale
|
$ |
-
|
$ |
44
|
Other
|
||||||||||||||||
Postretirement
|
||||||||||||||||
Pension
Plans
|
Benefit
Plans
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Three
Months Ended June 30, 2007 and 2006
|
(in
millions)
|
|||||||||||||||
Service
Cost
|
$ |
23
|
$ |
24
|
$ |
11
|
$ |
10
|
||||||||
Interest
Cost
|
57
|
57
|
26
|
25
|
||||||||||||
Expected
Return on Plan Assets
|
(82 | ) | (83 | ) | (26 | ) | (23 | ) | ||||||||
Amortization
of Transition Obligation
|
-
|
-
|
7
|
7
|
||||||||||||
Amortization
of Net Actuarial Loss
|
14
|
19
|
3
|
5
|
||||||||||||
Net
Periodic Benefit Cost
|
$ |
12
|
$ |
17
|
$ |
21
|
$ |
24
|
Other
|
||||||||||||||||
Postretirement
|
||||||||||||||||
Pension
Plans
|
Benefit
Plans
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Six
Months Ended June 30, 2007 and 2006
|
(in
millions)
|
|||||||||||||||
Service
Cost
|
$ |
47
|
$ |
48
|
$ |
21
|
$ |
20
|
||||||||
Interest
Cost
|
116
|
114
|
52
|
50
|
||||||||||||
Expected
Return on Plan Assets
|
(167 | ) | (166 | ) | (52 | ) | (46 | ) | ||||||||
Amortization
of Transition Obligation
|
-
|
-
|
14
|
14
|
||||||||||||
Amortization
of Net Actuarial Loss
|
29
|
39
|
6
|
10
|
||||||||||||
Net
Periodic Benefit Cost
|
$ |
25
|
$ |
35
|
$ |
41
|
$ |
48
|
7.
|
BUSINESS
SEGMENTS
|
·
|
Generation
of electricity for sale to U.S. retail and wholesale
customers.
|
·
|
Electricity
transmission and distribution in the
U.S.
|
·
|
Barging
operations that annually transport approximately 34 million tons
of coal
and dry bulk commodities primarily on the Ohio, Illinois and lower
Mississippi rivers. Approximately 35% of the barging operations
relates to the transportation of coal, 30% relates to agricultural
products, 18% relates to steel and 17% relates to other
commodities.
|
·
|
IPPs,
wind farms and marketing and risk management activities primarily
in
ERCOT.
|
·
|
Parent’s
guarantee revenue received from affiliates, interest income and interest
expense and other nonallocated costs.
|
·
|
Other
energy supply related businesses, including the Plaquemine Cogeneration
Facility, which was sold in the fourth quarter of
2006.
|
Nonutility
Operations
|
||||||||||||||||||||||||
Utility
Operations
|
MEMCO
Operations
|
Generation
and
Marketing
|
All
Other (a)
|
Reconciling
Adjustments
|
Consolidated
|
|||||||||||||||||||
(in
millions)
|
||||||||||||||||||||||||
Three
Months Ended June 30, 2007
|
||||||||||||||||||||||||
Revenues
from:
|
||||||||||||||||||||||||
External
Customers
|
$ |
2,818
|
$ |
116
|
$ |
218
|
$ | (6 | ) | $ |
-
|
$ |
3,146
|
|||||||||||
Other
Operating Segments
|
136
|
3
|
(113 | ) |
12
|
(38 | ) |
-
|
||||||||||||||||
Total
Revenues
|
$ |
2,954
|
$ |
119
|
$ |
105
|
$ |
6
|
$ | (38 | ) | $ |
3,146
|
|||||||||||
Income
(Loss) Before Discontinued
Operations
and Extraordinary Loss
|
$ |
238
|
$ |
7
|
$ |
15
|
$ | (3 | ) | $ |
-
|
$ |
257
|
|||||||||||
Discontinued
Operations, Net of Tax
|
-
|
-
|
-
|
2
|
-
|
2
|
||||||||||||||||||
Extraordinary
Loss, Net of Tax
|
(79 | ) |
-
|
-
|
-
|
-
|
(79 | ) | ||||||||||||||||
Net
Income (Loss)
|
$ |
159
|
$ |
7
|
$ |
15
|
$ | (1 | ) | $ |
-
|
$ |
180
|
Nonutility
Operations
|
||||||||||||||||||||||||
Utility
Operations
|
MEMCO
Operations
|
Generation
and
Marketing
|
All
Other (a)
|
Reconciling
Adjustments
|
Consolidated
|
|||||||||||||||||||
(in
millions)
|
||||||||||||||||||||||||
Three
Months Ended June 30, 2006
|
||||||||||||||||||||||||
Revenues
from:
|
||||||||||||||||||||||||
External
Customers
|
$ |
2,799
|
$ |
117
|
$ |
20
|
$ |
-
|
$ |
-
|
$ |
2,936
|
||||||||||||
Other
Operating Segments
|
(3 | ) |
2
|
-
|
15
|
(14 | ) |
-
|
||||||||||||||||
Total
Revenues
|
$ |
2,796
|
$ |
119
|
$ |
20
|
$ |
15
|
$ | (14 | ) | $ |
2,936
|
|||||||||||
Income
(Loss) Before Discontinued
Operations
|
$ |
159
|
$ |
14
|
$ |
2
|
$ | (3 | ) | $ |
-
|
$ |
172
|
|||||||||||
Discontinued
Operations, Net of Tax
|
-
|
-
|
-
|
3
|
-
|
3
|
||||||||||||||||||
Net
Income
|
$ |
159
|
$ |
14
|
$ |
2
|
$ |
-
|
$ |
-
|
$ |
175
|
Nonutility
Operations
|
||||||||||||||||||||||||
Utility
Operations
|
MEMCO
Operations
|
Generation
and
Marketing
|
All
Other (a)
|
Reconciling
Adjustments
|
Consolidated
|
|||||||||||||||||||
(in
millions)
|
||||||||||||||||||||||||
Six
Months Ended June 30, 2007
|
||||||||||||||||||||||||
Revenues
from:
|
|
|||||||||||||||||||||||
External
Customers
|
$ |
5,704
|
$ |
233
|
$ |
333
|
$ |
45
|
$ |
-
|
$ |
6,315
|
||||||||||||
Other
Operating Segments
|
283
|
6
|
(186 | ) | (33 | ) | (70 | ) |
-
|
|||||||||||||||
Total
Revenues
|
$ |
5,987
|
$ |
239
|
$ |
147
|
$ |
12
|
$ | (70 | ) | $ |
6,315
|
|||||||||||
Income
Before Discontinued
Operations
and Extraordinary Loss
|
$ |
491
|
$ |
22
|
$ |
14
|
$ |
1
|
$ |
-
|
$ |
528
|
||||||||||||
Discontinued
Operations, Net of Tax
|
-
|
-
|
-
|
2
|
-
|
2
|
||||||||||||||||||
Extraordinary
Loss, Net of Tax
|
(79 | ) |
-
|
-
|
-
|
-
|
(79 | ) | ||||||||||||||||
Net
Income
|
$ |
412
|
$ |
22
|
$ |
14
|
$ |
3
|
$ |
-
|
$ |
451
|
Nonutility
Operations
|
||||||||||||||||||||||||
Utility
Operations
|
MEMCO
Operations
|
Generation
and
Marketing
|
All
Other (a)
|
Reconciling
Adjustments
|
Consolidated
|
|||||||||||||||||||
(in
millions)
|
||||||||||||||||||||||||
Six
Months Ended June 30, 2006
|
||||||||||||||||||||||||
Revenues
from:
|
||||||||||||||||||||||||
External
Customers
|
$ |
5,781
|
$ |
233
|
$ |
33
|
$ | (3 | ) | $ |
-
|
$ |
6,044
|
|||||||||||
Other
Operating Segments
|
(19 | ) |
5
|
-
|
37
|
(23 | ) |
-
|
||||||||||||||||
Total
Revenues
|
$ |
5,762
|
$ |
238
|
$ |
33
|
$ |
34
|
$ | (23 | ) | $ |
6,044
|
|||||||||||
Income
(Loss) Before Discontinued
Operations
|
$ |
524
|
$ |
35
|
$ |
6
|
$ | (15 | ) | $ |
-
|
$ |
550
|
|||||||||||
Discontinued
Operations, Net of Tax
|
-
|
-
|
-
|
6
|
-
|
6
|
||||||||||||||||||
Net
Income (Loss)
|
$ |
524
|
$ |
35
|
$ |
6
|
$ | (9 | ) | $ |
-
|
$ |
556
|
Nonutility
Operations
|
||||||||||||||||||||||||
Utility
Operations
|
MEMCO
Operations
|
Generation
and
Marketing
|
All
Other (a)
|
Reconciling
Adjustments
|
Consolidated
|
|||||||||||||||||||
June
30, 2007
|
(in
millions)
|
|||||||||||||||||||||||
Total
Property, Plant and Equipment
|
$ |
43,794
|
$ |
241
|
$ |
566
|
$ |
36
|
$ | (237 | )(b) | $ |
44,400
|
|||||||||||
Accumulated
Depreciation and
Amortization
|
15,781
|
55
|
97
|
6
|
(6 | )(b) |
15,933
|
|||||||||||||||||
Total
Property, Plant and Equipment –
Net
|
$ |
28,013
|
$ |
186
|
$ |
469
|
$ |
30
|
$ | (231 | )(b) | $ |
28,467
|
|||||||||||
Total
Assets
|
$ |
38,109
|
$ |
307
|
$ |
752
|
$ |
11,901
|
$ | (11,875 | )(c) | $ |
39,193
|
Nonutility
Operations
|
||||||||||||||||||||||||
Utility
Operations
|
MEMCO
Operations
|
Generation
and
Marketing
|
All
Other (a)
|
Reconciling
Adjustments
|
Consolidated
|
|||||||||||||||||||
December
31, 2006
|
(in
millions)
|
|||||||||||||||||||||||
Total
Property, Plant and Equipment
|
$ |
41,420
|
$ |
239
|
$ |
327
|
$ |
35
|
$ |
-
|
$ |
42,021
|
||||||||||||
Accumulated
Depreciation and
Amortization
|
15,101
|
51
|
83
|
5
|
-
|
15,240
|
||||||||||||||||||
Total
Property, Plant and Equipment – Net
|
$ |
26,319
|
$ |
188
|
$ |
244
|
$ |
30
|
$ |
-
|
$ |
26,781
|
||||||||||||
Total
Assets
|
$ |
36,632
|
$ |
315
|
$ |
342
|
$ |
11,460
|
$ | (10,762 | )(c) | $ |
37,987
|
|||||||||||
Assets
Held for Sale
|
44
|
-
|
-
|
-
|
-
|
44
|
(a)
|
All
Other includes:
|
|
·
|
Parent’s
guarantee revenue received from affiliates, interest income and interest
expense and other nonallocated costs.
|
|
·
|
Other
energy supply related businesses, including the Plaquemine Cogeneration
Facility, which was sold in the fourth quarter of 2006.
|
|
(b)
|
Reconciling
Adjustments for Total Property, Plant and Equipment and Accumulated
Depreciation and Amortization as of June 30, 2007 represent the
elimination of an intercompany capital lease that began during the
first
quarter of 2007.
|
|
(c)
|
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.
|
8. INCOME
TAXES
|
9.
|
FINANCING
ACTIVITIES
|
June
30,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
Type
of Debt
|
(in
millions)
|
|||||||
Senior
Unsecured Notes
|
$ |
9,399
|
$ |
8,653
|
||||
Pollution
Control Bonds
|
2,153
|
1,950
|
||||||
First
Mortgage Bonds
|
90
|
90
|
||||||
Defeased
First Mortgage Bonds (a)
|
19
|
27
|
||||||
Notes
Payable
|
312
|
337
|
||||||
Securitization
Bonds
|
2,303
|
2,335
|
||||||
Notes
Payable To Trust
|
113
|
113
|
||||||
Spent
Nuclear Fuel Obligation (b)
|
253
|
247
|
||||||
Other
Long-term Debt
|
3
|
2
|
||||||
Unamortized
Discount (net)
|
(57 | ) | (56 | ) | ||||
Total
Long-term Debt Outstanding
|
14,588
|
13,698
|
||||||
Less
Portion Due Within One Year
|
1,521
|
1,269
|
||||||
Long-term
Portion
|
$ |
13,067
|
$ |
12,429
|
(a)
|
In
May 2004, cash and treasury securities were deposited with a trustee
to
defease all of TCC’s outstanding First Mortgage Bonds. The
defeased TCC First Mortgage Bonds had a balance of $19 million at
both
June 30, 2007 and December 31, 2006. Trust Fund Assets related
to this obligation of $23 million and $2 million at June 30, 2007
and
December 31, 2006, respectively, are included in Other Temporary
Investments and $21 million at December 31, 2006, is included in
Other
Noncurrent Assets on our Condensed Consolidated Balance
Sheets. In December 2005, cash and treasury securities were
deposited with a trustee to defease the remaining TNC outstanding
First
Mortgage Bond. The defeased TNC First Mortgage Bond was retired
in June 2007. The defeased TNC First Mortgage Bond had a
balance of $8 million at December 31, 2006. Trust
fund assets related to this obligation of $9 million at December
31, 2006,
are included in Other Temporary Investments on our Condensed Consolidated
Balance Sheet. Trust fund assets are restricted for exclusive
use in funding the interest and principal due on the First Mortgage
Bonds.
|
(b)
|
Pursuant
to the Nuclear Waste Policy Act of 1982, I&M (a nuclear licensee) has
an obligation with 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 of $277 million and $274 million
at June
30, 2007 and December 31, 2006, respectively, are included in Spent
Nuclear Fuel and Decommissioning Trusts on our Condensed Consolidated
Balance Sheets.
|
Company
|
Type
of Debt
|
Principal
Amount
|
Interest
Rate
|
Due
Date
|
||||||
(in
millions)
|
(%)
|
|||||||||
Issuances:
|
||||||||||
APCo
|
Pollution
Control Bonds
|
$
|
75
|
Variable
|
2037
|
|||||
OPCo
|
Pollution
Control Bonds
|
65
|
4.90
|
2037
|
||||||
OPCo
|
Senior
Unsecured Notes
|
400
|
Variable
|
2010
|
||||||
PSO
|
Pollution
Control Bonds
|
13
|
4.45
|
2020
|
||||||
SWEPCo
|
Senior
Unsecured Notes
|
250
|
5.55
|
2017
|
||||||
Non-Registrant:
|
||||||||||
AEGCo
|
Senior
Unsecured Notes
|
220
|
6.33
|
2037
|
||||||
TCC
|
Pollution
Control Bonds
|
6
|
4.45
|
2020
|
||||||
TNC
|
Pollution
Control Bonds
|
44
|
4.45
|
2020
|
||||||
Total
Issuances
|
$
|
1,073
|
(a)
|
(a)
|
Amount
indicated on statement of cash flows of $1,064 million is net of
issuance
costs and unamortized premium or
discount.
|
Company
|
Type
of Debt
|
Principal
Amount
Paid
|
Interest
Rate
|
Due
Date
|
||||||
(in
millions)
|
(%)
|
|||||||||
Retirements
and Principal Payments:
|
||||||||||
APCo
|
Senior
Unsecured Notes
|
$
|
125
|
Variable
|
2007
|
|||||
OPCo
|
Notes
Payable
|
3
|
6.81
|
2008
|
||||||
OPCo
|
Notes
Payable
|
6
|
6.27
|
2009
|
||||||
SWEPCo
|
Notes
Payable
|
3
|
4.47
|
2011
|
||||||
SWEPCo
|
Notes
Payable
|
4
|
6.36
|
2007
|
||||||
SWEPCo
|
Notes
Payable
|
2
|
Variable
|
2008
|
||||||
Non-Registrant:
|
||||||||||
AEP
Subsidiaries
|
Notes
Payable
|
3
|
Variable
|
2017
|
||||||
CSW
Energy, Inc.
|
Notes
Payable
|
4
|
5.88
|
2011
|
||||||
TCC
|
Securitization
Bonds
|
32
|
5.01
|
2008
|
||||||
TNC
|
Defeased
First Mortgage Bonds
|
8
|
7.75
|
2007
|
||||||
Total
Retirements and
Principal
Payments
|
$
|
190
|
June
30, 2007
|
December
31, 2006
|
||||||||||||||||
Outstanding
Amount
|
Interest
Rate
|
Outstanding
Amount
|
Interest
Rate
|
||||||||||||||
Type
of Debt
|
(in
millions)
|
(in
millions)
|
|||||||||||||||
Commercial
Paper – AEP
|
$ |
416
|
5.40 | % |
(a)
|
$ |
-
|
-
|
|||||||||
Commercial
Paper – JMG (b)
|
-
|
-
|
1
|
5.56 | % | ||||||||||||
Line
of Credit – Sabine (c)
|
22
|
6.20 | % |
17
|
6.38 | % | |||||||||||
Total
|
$ |
438
|
$ |
18
|
(a)
|
Weighted
average rate.
|
(b)
|
This
commercial paper is specifically associated with the Gavin Scrubber
and is
backed by a separate credit facility. This commercial paper
does not reduce available liquidity under AEP’s credit
facilities.
|
(c)
|
Sabine
is consolidated under FIN 46. This line of credit does not
reduce available liquidity under AEP’s credit
facilities.
|
Second
Quarter of 2006
|
$ |
10
|
||||||
Changes
in Gross Margin:
|
||||||||
Retail
Margins
|
(39 | ) | ||||||
Off-system
Sales
|
18
|
|||||||
Transmission
Revenues
|
7
|
|||||||
Other
|
3
|
|||||||
Total
Change in Gross Margin
|
(11 | ) | ||||||
Changes
in Operating Expenses and Other:
|
||||||||
Other
Operation and Maintenance
|
(3 | ) | ||||||
Depreciation
and Amortization
|
17
|
|||||||
Carrying
Costs Income
|
3
|
|||||||
Other
Income, Net
|
(5 | ) | ||||||
Interest
Expense
|
(13 | ) | ||||||
Total
Change in Operating Expenses and Other
|
(1 | ) | ||||||
Income
Tax Expense
|
5
|
|||||||
Second Quarter of 2007
|
$ |
3
|
·
|
Retail
Margins decreased $39 million in comparison to 2006 primarily due
to:
|
|
·
|
A
$38 million decrease in retail revenues primarily related to APCo’s
Virginia base rate case which includes a second quarter 2007 provision
for
revenue refund as a result of the final order offset by the new
rates
implemented. See “Virginia Base Rate Case” section of Note
3.
|
|
·
|
A
$24 million increase in capacity settlement expenses under the
Interconnection Agreement reflecting APCo’s new peak demand in February
2007.
|
|
·
|
A
$12 million decrease in revenues related to financial transmission
rights,
net of congestion, primarily due to fewer transmission constraints
in the
PJM market.
|
|
These
decreases were partially offset by:
|
||
·
|
A
$16 million increase in revenues related to the Expanded Net Energy
Cost
(ENEC) mechanism with West Virginia retail
customers. The mechanism was reinstated in West Virginia
effective July 1, 2006 in conjunction with the West Virginia rate
case.
|
|
·
|
An
$18 million increase in retail sales primarily due to increased
demand in
the residential class associated with favorable weather
conditions. Cooling degree days increased approximately
54%.
|
|
·
|
Margins
from Off-system Sales increased $18 million primarily due to higher
power
prices in the east, higher trading margins, and an increase in
APCo’s
allocated share of off-system sales revenues due to its new peak.
|
|
·
|
Transmission
Revenues increased $7 million primarily due to a provision recorded
in the
second quarter of 2006 related to potential SECA refunds. See
“Transmission Rate Proceedings at the FERC” section of Note
3.
|
·
|
Other
Operation and Maintenance expenses increased $3 million primarily
due to
the following:
|
|
·
|
A
$4 million increase in steam maintenance expenses resulting from
2007
planned outages at the Amos and Glen Lyn plants.
|
|
·
|
A
$3 million increase in customer accounts and services expense primarily
related to an increase in uncollectible accounts under a contract
dispute.
|
|
These
increases were offset by:
|
||
·
|
A
$5 million decrease in expenses related to the AEP Transmission
Equalization Agreement due to the addition of the Wyoming-Jacksons
Ferry
765 kV line which was energized and placed into service in June
2006.
|
|
·
|
Depreciation
and Amortization expenses decreased $17 million primarily due to
lower
Virginia depreciation rates implemented retroactively to January
2006 for
$15 million and lower amortization resulting from a net deferral
of $9
million in ARO costs as ordered in APCo’s Virginia base rate
case. These decreases were partially offset by the amortization
of carrying charges and depreciation expense of $3 million that
are being
collected through the E&R surcharge mechanism. In addition, an
increase in depreciation expense was also related to the Wyoming-Jacksons
Ferry 765 kV line, which was energized and placed in service in
June 2006,
and the Mountaineer scrubber, which was placed in service in February
2007.
|
|
·
|
Carrying
Costs Income increased $3 million related to carrying costs associated
with the E&R case.
|
|
·
|
Other
Income, Net decreased $5 million primarily due to a $2 million
decrease in
interest income from the Utility Money Pool and a $2 million decrease
in
AFUDC resulting from a lower construction work in progress (CWIP)
balance
after the Wyoming-Jacksons Ferry 765 kv line and the Mountaineer
scrubber
were placed into service.
|
|
·
|
Interest
Expense increased $13 million primarily due to a $6 million decrease
in
allowance for borrowed funds used for construction, a $3 million
increase
in interest expense from the Utility Money Pool, and a $3 million
increase
in the interest on the Virginia provision for
refund.
|
Six
Months Ended June 30, 2006
|
$ |
83
|
||||||
Changes
in Gross Margin:
|
||||||||
Retail
Margins
|
(10 | ) | ||||||
Off-system
Sales
|
12
|
|||||||
Transmission
Revenues
|
(4 | ) | ||||||
Other
|
4
|
|||||||
Total
Change in Gross Margin
|
2
|
|||||||
Changes
in Operating Expenses and Other:
|
||||||||
Other
Operation and Maintenance
|
(8 | ) | ||||||
Depreciation
and Amortization
|
7
|
|||||||
Taxes
Other Than Income Taxes
|
2
|
|||||||
Other
Income, Net
|
(5 | ) | ||||||
Interest
Expense
|
(15 | ) | ||||||
Total
Change in Operating Expenses and Other
|
(19 | ) | ||||||
Income
Tax Expense
|
8
|
|||||||
Six Months Ended June 30, 2007
|
$ |
74
|
·
|
Retail
Margins decreased $10 million in comparison to 2006 primarily due
to:
|
|
·
|
A
$26 million decrease in revenues related to financial transmission
rights,
net of congestion, primarily due to fewer transmission constraints
in the
PJM market.
|
|
·
|
A
$26 million increase in capacity settlement expenses under the
Interconnection Agreement reflecting APCo’s new peak demand in February
2007.
|
|
These
decreases were partially offset by:
|
||
·
|
A
$7 million increase in revenues related to the ENEC mechanism with
West
Virginia retail customers. The mechanism was reinstated in
West Virginia effective July 1, 2006 in conjunction with the West
Virginia
rate case.
|
|
·
|
A
$27 million increase in retail sales primarily due to increased
demand in
the residential class associated with favorable weather
conditions. Heating degree days increased approximately 27% and
Cooling degree days increased approximately 62%.
|
|
·
|
A
$9 million increase in municipal and cooperative revenues primarily
due to
the addition of the Blue Ridge Power Agency customers.
|
|
·
|
Margins
from Off-system Sales increased $12 million primarily due to higher
power
prices in the east, higher trading margins, an increase in APCo’s
allocated share of off-system sales revenues due to its new peak,
and a
change in the allocation of off-system sales margins under the
SIA
effective April 1, 2006.
|
|
·
|
Transmission
Revenues decreased $4 million primarily due to the elimination
of SECA
revenues of $13 million as of April 1, 2006. See “Transmission
Rate Proceedings at the FERC” section of Note 3. This decrease
was partially offset by a provision recorded in the second quarter
of 2006
related to potential SECA refunds and additional transmission revenues
relating to dedicated energy sales of $2 million.
|
|
·
|
Other
revenue increased $4 primarily due to the reversal of previously
deferred
gains on sales of allowances associated with the E&R
case.
|
·
|
Other
Operation and Maintenance expenses increased $8 million primarily
due to
the following:
|
|
·
|
A
$4 million increase in steam maintenance expenses resulting from
2007
planned outages at the Amos and Glen Lyn plants.
|
|
·
|
A
$6 million increase in expenses for distribution line right-of-way
clearing.
|
|
·
|
A
$4 million increase in uncollectible and factored accounts receivable
expense.
|
|
·
|
An
$8 million increase in employee related and various other operational
expenses.
|
|
These
increases were partially offset by:
|
||
·
|
A
$14 million decrease in expenses related to the AEP Transmission
Equalization Agreement due to the addition of the Wyoming-Jacksons
Ferry
765 kV line, which was energized and placed into service in June
2006.
|
|
·
|
Depreciation
and Amortization expenses decreased $7 million primarily due to
lower
Virginia depreciation rates implemented retroactively to January
2006 for
$15 million and lower amortization resulting from a net deferral
of $9
million in ARO costs as ordered in APCo’s Virginia base rate
case. These decreases were partially offset by the amortization
of carrying charges and depreciation expense of $13 million that
are being
collected through the E&R surcharges. In addition, an
increase in depreciation expense was also related to the Wyoming-Jacksons
Ferry 765 kV line, which was energized and placed in service in
June 2006,
and the Mountaineer scrubber, which was placed in service in February
2007.
|
|
·
|
Other
Income, Net decreased $5 million primarily due to lower interest
income
from the Utility Money Pool of $2 million and a $2 million decrease
in
AFUDC resulting from a lower CWIP balance after the Wyoming-Jacksons
Ferry
765 kV line and the Mountaineer scrubber were placed into
service.
|
|
·
|
Interest
Expense increased $15 million primarily due to an $8 million increase
related to the issuance of $500 million of debt in April 2006 and
a $4
million decrease in allowance for borrowed funds used during
construction.
|
Moody’s
|
S&P
|
Fitch
|
|||
Senior
Unsecured Debt
|
Baa2
|
BBB
|
BBB+
|
2007
|
2006
|
|||||||
(in
thousands)
|
||||||||
Cash
and Cash Equivalents at Beginning of Period
|
$ |
2,318
|
$ |
1,741
|
||||
Cash
Flows From (Used For):
|
||||||||
Operating
Activities
|
265,414
|
316,970
|
||||||
Investing
Activities
|
(378,985 | ) | (618,920 | ) | ||||
Financing
Activities
|
112,605
|
301,555
|
||||||
Net
Decrease in Cash and Cash Equivalents
|
(966 | ) | (395 | ) | ||||
Cash
and Cash Equivalents at End of Period
|
$ |
1,352
|
$ |
1,346
|
Principal
Amount
|
Interest
|
Due
|
|||||
Type
of Debt
|
Rate
|
Date
|
|||||
(in
thousands)
|
(%)
|
||||||
Pollution
Control Bonds
|
$
|
75,000
|
Variable
|
2037
|
Principal
Amount
|
Interest
|
Due
|
|||||
Type
of Debt
|
Rate
|
Date
|
|||||
(in
thousands)
|
(%)
|
||||||
Senior
Unsecured Notes
|
$
|
125,000
|
Variable
|
2007
|
MTM
Risk Management Contracts
|
Cash
Flow &
Fair
Value Hedges
|
DETM
Assignment (a)
|
Total
|
|||||||||||||
Current
Assets
|
$ |
73,123
|
$ |
11,439
|
$ |
-
|
$ |
84,562
|
||||||||
Noncurrent
Assets
|
84,029
|
2,919
|
-
|
86,948
|
||||||||||||
Total
MTM Derivative Contract Assets
|
157,152
|
14,358
|
-
|
171,510
|
||||||||||||
Current
Liabilities
|
(55,013 | ) | (1,137 | ) | (3,570 | ) | (59,720 | ) | ||||||||
Noncurrent
Liabilities
|
(51,130 | ) | (87 | ) | (7,551 | ) | (58,768 | ) | ||||||||
Total
MTM Derivative Contract Liabilities
|
(106,143 | ) | (1,224 | ) | (11,121 | ) | (118,488 | ) | ||||||||
Total
MTM Derivative Contract Net Assets
(Liabilities)
|
$ |
51,009
|
$ |
13,134
|
$ | (11,121 | ) | $ |
53,022
|
(a)
|
See
“Natural Gas Contracts with DETM” section of Note 16 of the 2006 Annual
Report.
|
Total
MTM Risk Management Contract Net Assets at December 31,
2006
|
$
|
52,489
|
||
(Gain)
Loss from Contracts Realized/Settled During the Period and Entered
in a
Prior Period
|
(8,051
|
)
|
||
Fair
Value of New Contracts at Inception When Entered During the Period
(a)
|
255
|
|||
Net
Option Premiums Paid/(Received) for Unexercised or Unexpired Option
Contracts Entered During the Period
|
511
|
|||
Change
in Fair Value Due to Valuation Methodology Changes on Forward
Contracts
|
-
|
|||
Changes
in Fair Value Due to Market Fluctuations During the Period
(b)
|
4,757
|
|||
Changes
in Fair Value Allocated to Regulated Jurisdictions (c)
|
1,048
|
|||
Total
MTM Risk Management Contract Net Assets
|
51,009
|
|||
Net
Cash Flow & Fair Value Hedge Contracts
|
13,134
|
|||
DETM
Assignment (d)
|
(11,121
|
)
|
||
Total
MTM Risk Management Contract Net Assets at June 30,
2007
|
$
|
53,022
|
(a)
|
Reflects
fair value on long-term contracts which are typically with customers
that
seek fixed pricing to limit their risk against fluctuating energy
prices. Inception value is only recorded if observable market
data can be obtained for valuation inputs for the entire contract
term. The contract prices are valued against market curves
associated with the delivery location and delivery
term.
|
(b)
|
Market
fluctuations are attributable to various factors such as supply/demand,
weather, storage, etc.
|
(c)
|
“Changes
in Fair Value Allocated to Regulated Jurisdictions” relates to the net
gains (losses) of those contracts that are not reflected in the
Condensed
Consolidated Statements of Income. These net gains (losses) are
recorded as regulatory liabilities/assets for those subsidiaries
that
operate in regulated jurisdictions.
|
(d)
|
See
“Natural Gas Contracts with DETM” section of Note 16 of the 2006 Annual
Report.
|
·
|
The
method of measuring fair value used in determining the carrying
amount of
total MTM asset or liability (external sources or modeled
internally).
|
·
|
The
maturity, by year, of net assets/liabilities to give an indication
of when
these MTM amounts will settle and generate
cash.
|
Remainder
2007
|
2008
|
2009
|
2010
|
2011
|
After
2011
|
Total
|
||||||||||||||||
Prices
Actively Quoted – Exchange Traded
Contracts
|
$ |
4,823
|
$ | (3,624 | ) | $ |
163
|
$ |
-
|
$ |
-
|
$ |
-
|
$ |
1,362
|
|||||||
Prices
Provided by Other External Sources
–
OTC Broker Quotes
(a)
|
6,824
|
16,070
|
12,886
|
5,714
|
-
|
-
|
41,494
|
|||||||||||||||
Prices
Based on Models and Other Valuation
Methods (b)
|
(401 | ) | (1,510 | ) |
1,682
|
5,485
|
1,248
|
1,649
|
8,153
|
|||||||||||||
Total
|
$ |
11,246
|
$ |
10,936
|
$ |
14,731
|
$ |
11,199
|
$ |
1,248
|
$ |
1,649
|
$ |
51,009
|
(a)
|
“Prices
Provided by Other External Sources – OTC Broker Quotes” reflects
information obtained from over-the-counter brokers, industry services,
or
multiple-party on-line platforms.
|
(b)
|
“Prices
Based on Models and Other Valuation Methods” is used in absence of
independent information from external sources. Modeled
information is derived using valuation models developed by the
reporting
entity, reflecting when appropriate, option pricing theory, discounted
cash flow concepts, valuation adjustments, etc. and may require
projection
of prices for underlying commodities beyond the period that prices
are
available from third-party sources. In addition, where external
pricing information or market liquidity are limited, such valuations
are
classified as modeled. The determination of the point at which
a market is no longer liquid for placing it in the modeled category
varies
by market. Contract values that are measured using models or
valuation methods other than active quotes or OTC broker quotes
(because
of the lack of such data for all delivery quantities, locations
and
periods) incorporate in the model or other valuation methods, to
the
extent possible, OTC broker quotes and active quotes for deliveries
in
years and at locations for which such quotes are available including
values determinable by other third party
transactions.
|
Power
|
Foreign
Currency
|
Interest
Rate
|
Total
|
|||||||||||||
Beginning
Balance in AOCI December 31, 2006
|
$
|
5,332
|
$
|
(164
|
)
|
$
|
(7,715
|
)
|
$
|
(2,547
|
)
|
|||||
Changes
in Fair Value
|
7,980
|
-
|
-
|
7,980
|
||||||||||||
Reclassifications
from AOCI to Net Income for Cash Flow Hedges Settled
|
(4,067
|
)
|
3
|
694
|
(3,370
|
)
|
||||||||||
Ending
Balance in AOCI June 30, 2007
|
$
|
9,245
|
$
|
(161
|
)
|
$
|
(7,021
|
)
|
$
|
2,063
|
Six
Months Ended
June
30, 2007
|
Twelve
Months Ended
December
31, 2006
|
||||||||||||||||
(in
thousands)
|
(in
thousands)
|
||||||||||||||||
End
|
High
|
Average
|
Low
|
End
|
High
|
Average
|
Low
|
||||||||||
$475
|
$2,328
|
$779
|
$227
|
$756
|
$1,915
|
$658
|
$358
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
REVENUES
|
||||||||||||||||
Electric
Generation, Transmission and Distribution
|
$ |
499,189
|
$ |
464,058
|
$ |
1,100,735
|
$ |
1,024,051
|
||||||||
Sales
to AEP Affiliates
|
55,371
|
48,608
|
116,916
|
120,380
|
||||||||||||
Other
|
2,850
|
1,922
|
5,487
|
4,598
|
||||||||||||
TOTAL
|
557,410
|
514,588
|
1,223,138
|
1,149,029
|
||||||||||||
EXPENSES
|
||||||||||||||||
Fuel
and Other Consumables Used for Electric Generation
|
164,018
|
155,240
|
335,204
|
322,093
|
||||||||||||
Purchased
Electricity for Resale
|
34,328
|
29,979
|
70,278
|
57,595
|
||||||||||||
Purchased
Electricity from AEP Affiliates
|
144,630
|
103,457
|
272,231
|
225,856
|
||||||||||||
Other
Operation
|
75,125
|
77,156
|
142,754
|
147,057
|
||||||||||||
Maintenance
|
51,414
|
46,668
|
97,167
|
84,507
|
||||||||||||
Depreciation
and Amortization
|
31,076
|
48,688
|
90,236
|
96,956
|
||||||||||||
Taxes
Other Than Income Taxes
|
22,975
|
22,799
|
44,250
|
45,891
|
||||||||||||
TOTAL
|
523,566
|
483,987
|
1,052,120
|
979,955
|
||||||||||||
OPERATING
INCOME
|
33,844
|
30,601
|
171,018
|
169,074
|
||||||||||||
Other
Income (Expense):
|
||||||||||||||||
Interest
Income
|
390
|
2,814
|
1,029
|
3,765
|
||||||||||||
Carrying
Costs Income
|
10,950
|
7,773
|
14,116
|
13,784
|
||||||||||||
Allowance
for Equity Funds Used During Construction
|
1,581
|
4,083
|
4,358
|
6,559
|
||||||||||||
Interest
Expense
|
(44,955 | ) | (31,653 | ) | (76,778 | ) | (61,921 | ) | ||||||||
INCOME
BEFORE INCOME TAXES
|
1,810
|
13,618
|
113,743
|
131,261
|
||||||||||||
Income
Tax Expense (Credit)
|
(1,471 | ) |
3,971
|
40,235
|
48,020
|
|||||||||||
INCOME
BEFORE EXTRAORDINARY LOSS
|
3,281
|
9,647
|
73,508
|
83,241
|
||||||||||||
Extraordinary
Loss – Reapplication of Regulatory Accounting for
Generation, Net of Tax
|
(78,763 | ) |
-
|
(78,763 | ) |
-
|
||||||||||
NET
INCOME (LOSS)
|
(75,482 | ) |
9,647
|
(5,255 | ) |
83,241
|
||||||||||
Preferred
Stock Dividend Requirements Including Capital
Stock Expense
|
238
|
238
|
476
|
476
|
||||||||||||
EARNINGS
(LOSS) APPLICABLE TO COMMON STOCK
|
$ | (75,720 | ) | $ |
9,409
|
$ | (5,731 | ) | $ |
82,765
|
Common
Stock
|
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other Comprehensive Income (Loss)
|
Total
|
||||||||||||||||
DECEMBER
31, 2005
|
$ |
260,458
|
$ |
924,837
|
$ |
635,016
|
$ | (16,610 | ) | $ |
1,803,701
|
|||||||||
Common
Stock Dividends
|
(5,000 | ) | (5,000 | ) | ||||||||||||||||
Preferred
Stock Dividends
|
(400 | ) | (400 | ) | ||||||||||||||||
Capital
Stock Expense and Other
|
80
|
(76 | ) |
4
|
||||||||||||||||
TOTAL
|
1,798,305
|
|||||||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||||||
Other
Comprehensive Income, Net of Taxes:
|
||||||||||||||||||||
Cash
Flow Hedges, Net of Tax of $9,692
|
17,998
|
17,998
|
||||||||||||||||||
NET
INCOME
|
83,241
|
83,241
|
||||||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
101,239
|
|||||||||||||||||||
JUNE
30, 2006
|
$ |
260,458
|
$ |
924,917
|
$ |
712,781
|
$ |
1,388
|
$ |
1,899,544
|
||||||||||
DECEMBER
31, 2006
|
$ |
260,458
|
$ |
1,024,994
|
$ |
805,513
|
$ | (54,791 | ) | $ |
2,036,174
|
|||||||||
FIN
48 Adoption, Net of Tax
|
(2,685 | ) | (2,685 | ) | ||||||||||||||||
Common
Stock Dividends
|
(25,000 | ) | (25,000 | ) | ||||||||||||||||
Preferred
Stock Dividends
|
(400 | ) | (400 | ) | ||||||||||||||||
Capital
Stock Expense and Other
|
76
|
(76 | ) |
-
|
||||||||||||||||
TOTAL
|
2,008,089
|
|||||||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||||||
Other
Comprehensive Income, Net of Taxes:
|
||||||||||||||||||||
Cash
Flow Hedges, Net of Tax of $2,482
|
4,610
|
4,610
|
||||||||||||||||||
SFAS
158 Costs Established as a Regulatory
Asset
Related to the Reapplication of
SFAS
71, Net of Tax of $6,055
|
11,245
|
11,245
|
||||||||||||||||||
NET
LOSS
|
(5,255 | ) | (5,255 | ) | ||||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
10,600
|
|||||||||||||||||||
JUNE
30, 2007
|
$ |
260,458
|
$ |
1,025,070
|
$ |
772,097
|
$ | (38,936 | ) | $ |
2,018,689
|
2007
|
2006
|
|||||||
CURRENT
ASSETS
|
||||||||
Cash
and Cash Equivalents
|
$ |
1,352
|
$ |
2,318
|
||||
Accounts
Receivable:
|
||||||||
Customers
|
176,758
|
180,190
|
||||||
Affiliated
Companies
|
76,139
|
98,237
|
||||||
Accrued
Unbilled Revenues
|
28,373
|
46,281
|
||||||
Miscellaneous
|
3,343
|
3,400
|
||||||
Allowance
for Uncollectible Accounts
|
(8,779 | ) | (4,334 | ) | ||||
Total
Accounts Receivable
|
275,834
|
323,774
|
||||||
Fuel
|
89,129
|
77,077
|
||||||
Materials
and Supplies
|
71,994
|
56,235
|
||||||
Risk
Management Assets
|
84,562
|
105,376
|
||||||
Accrued
Tax Benefits
|
10,095
|
3,748
|
||||||
Regulatory
Asset for Under-Recovered Fuel Costs
|
6,591
|
29,526
|
||||||
Prepayments
and Other
|
17,266
|
20,126
|
||||||
TOTAL
|
556,823
|
618,180
|
||||||
PROPERTY,
PLANT AND EQUIPMENT
|
||||||||
Electric:
|
||||||||
Production
|
3,487,306
|
2,844,803
|
||||||
Transmission
|
1,658,340
|
1,620,512
|
||||||
Distribution
|
2,309,637
|
2,237,887
|
||||||
Other
|
344,201
|
339,450
|
||||||
Construction
Work in Progress
|
592,554
|
957,626
|
||||||
Total
|
8,392,038
|
8,000,278
|
||||||
Accumulated
Depreciation and Amortization
|
2,554,296
|
2,476,290
|
||||||
TOTAL
- NET
|
5,837,742
|
5,523,988
|
||||||
OTHER
NONCURRENT ASSETS
|
||||||||
Regulatory
Assets
|
675,027
|
622,153
|
||||||
Long-term
Risk Management Assets
|
86,948
|
88,906
|
||||||
Deferred
Charges and Other
|
163,892
|
163,089
|
||||||
TOTAL
|
925,867
|
874,148
|
||||||
TOTAL
ASSETS
|
$ |
7,320,432
|
$ |
7,016,316
|
2007
|
2006
|
|||||||
CURRENT
LIABILITIES
|
(in
thousands)
|
|||||||
Advances
from Affiliates
|
$ |
247,616
|
$ |
34,975
|
||||
Accounts
Payable:
|
||||||||
General
|
232,509
|
296,437
|
||||||
Affiliated
Companies
|
92,697
|
105,525
|
||||||
Long-term
Debt Due Within One Year – Nonaffiliated
|
399,144
|
324,191
|
||||||
Risk
Management Liabilities
|
59,720
|
81,114
|
||||||
Customer
Deposits
|
64,285
|
56,364
|
||||||
Accrued
Taxes
|
102,445
|
60,056
|
||||||
Other
|
260,549
|
172,943
|
||||||
TOTAL
|
1,458,965
|
1,131,605
|
||||||
NONCURRENT
LIABILITIES
|
||||||||
Long-term
Debt – Nonaffiliated
|
2,050,742
|
2,174,473
|
||||||
Long-term
Debt – Affiliated
|
100,000
|
100,000
|
||||||
Long-term
Risk Management Liabilities
|
58,768
|
64,909
|
||||||
Deferred
Income Taxes
|
892,735
|
957,229
|
||||||
Regulatory
Liabilities and Deferred Investment Tax Credits
|
487,643
|
309,724
|
||||||
Deferred
Credits and Other
|
235,127
|
224,439
|
||||||
TOTAL
|
3,825,015
|
3,830,774
|
||||||
TOTAL
LIABILITIES
|
5,283,980
|
4,962,379
|
||||||
Cumulative
Preferred Stock Not Subject to Mandatory Redemption
|
17,763
|
17,763
|
||||||
Commitments
and Contingencies (Note 4)
|
||||||||
COMMON
SHAREHOLDER’S EQUITY
|
||||||||
Common
Stock – No Par Value:
|
||||||||
Authorized
– 30,000,000 Shares
|
||||||||
Outstanding
– 13,499,500 Shares
|
260,458
|
260,458
|
||||||
Paid-in
Capital
|
1,025,070
|
1,024,994
|
||||||
Retained
Earnings
|
772,097
|
805,513
|
||||||
Accumulated
Other Comprehensive Income (Loss)
|
(38,936 | ) | (54,791 | ) | ||||
TOTAL
|
2,018,689
|
2,036,174
|
||||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$ |
7,320,432
|
$ |
7,016,316
|
2007
|
2006
|
|||||||
OPERATING
ACTIVITIES
|
||||||||
Net
Income (Loss)
|
$ | (5,255 | ) | $ |
83,241
|
|||
Adjustments
for Noncash Items:
|
||||||||
Depreciation
and Amortization
|
90,236
|
96,956
|
||||||
Deferred
Income Taxes
|
(17,439 | ) | (1,466 | ) | ||||
Extraordinary
Loss, Net of Tax
|
78,763
|
-
|
||||||
Regulatory
Provision
|
105,110
|
-
|
||||||
Carrying
Costs Income
|
(14,116 | ) | (13,784 | ) | ||||
Mark-to-Market
of Risk Management Contracts
|
1,377
|
147
|
||||||
Change
in Other Noncurrent Assets
|
(12,254 | ) |
5,690
|
|||||
Change
in Other Noncurrent Liabilities
|
(1,239 | ) |
17,986
|
|||||
Changes
in Certain Components of Working Capital:
|
||||||||
Accounts
Receivable, Net
|
31,483
|
60,345
|
||||||
Fuel,
Materials and Supplies
|
(20,654 | ) | (8,611 | ) | ||||
Margin
Deposits
|
6,798
|
27,872
|
||||||
Accounts
Payable
|
(26,786 | ) |
14,993
|
|||||
Customer
Deposits
|
7,921
|
(24,824 | ) | |||||
Accrued
Taxes, Net
|
39,168
|
42,357
|
||||||
Fuel
Over/Under Recovery, Net
|
15,221
|
3,636
|
||||||
Other
Current Assets
|
(1,833 | ) |
7,295
|
|||||
Other
Current Liabilities
|
(11,087 | ) |
5,137
|
|||||
Net
Cash Flows From Operating Activities
|
265,414
|
316,970
|
||||||
INVESTING
ACTIVITIES
|
||||||||
Construction
Expenditures
|
(382,501 | ) | (404,252 | ) | ||||
Change
in Other Cash Deposits, Net
|
(2,678 | ) |
-
|
|||||
Change
in Advances to Affiliates, Net
|
-
|
(218,702 | ) | |||||
Proceeds
from Sales of Assets
|
6,194
|
4,034
|
||||||
Net
Cash Flows Used For Investing Activities
|
(378,985 | ) | (618,920 | ) | ||||
FINANCING
ACTIVITIES
|
||||||||
Issuance
of Long-term Debt – Nonaffiliated
|
73,438
|
544,364
|
||||||
Change
in Advances from Affiliates, Net
|
212,641
|
(194,133 | ) | |||||
Retirement
of Long-term Debt – Nonaffiliated
|
(125,006 | ) | (100,005 | ) | ||||
Retirement
of Preferred Stock
|
-
|
(14 | ) | |||||
Principal
Payments for Capital Lease Obligations
|
(2,200 | ) | (2,768 | ) | ||||
Funds
From Amended Coal Contract
|
-
|
68,078
|
||||||
Amortization
of Funds From Amended Coal Contract
|
(20,868 | ) | (8,567 | ) | ||||
Dividends
Paid on Common Stock
|
(25,000 | ) | (5,000 | ) | ||||
Dividends
Paid on Cumulative Preferred Stock
|
(400 | ) | (400 | ) | ||||
Net
Cash Flows From Financing Activities
|
112,605
|
301,555
|
||||||
Net
Decrease in Cash and Cash Equivalents
|
(966 | ) | (395 | ) | ||||
Cash
and Cash Equivalents at Beginning of Period
|
2,318
|
1,741
|
||||||
Cash
and Cash Equivalents at End of Period
|
$ |
1,352
|
$ |
1,346
|
||||
SUPPLEMENTARY
INFORMATION
|
||||||||
Cash
Paid for Interest, Net of Capitalized Amounts
|
$ |
69,823
|
$ |
51,558
|
||||
Net
Cash Paid for Income Taxes
|
6,197
|
4,562
|
||||||
Noncash
Acquisitions Under Capital Leases
|
1,693
|
2,287
|
||||||
Construction
Expenditures Included in Accounts Payable at June 30,
|
97,044
|
105,826
|
||||||
See
Condensed Notes to Condensed Financial Statements of Registrant
Subsidiaries.
|
Footnote
Reference
|
|
Significant
Accounting Matters
|
Note
1
|
New
Accounting Pronouncements and Extraordinary Item
|
Note
2
|
Rate
Matters
|
Note
3
|
Commitments,
Guarantees and Contingencies
|
Note
4
|
Benefit
Plans
|
Note
6
|
Business
Segments
|
Note
7
|
Income
Taxes
|
Note
8
|
Financing
Activities
|
Note
9
|
Second
Quarter of 2006
|
$ |
32
|
||||||
Changes
in Gross Margin:
|
||||||||
Retail
Margins
|
64
|
|||||||
Off-system
Sales
|
10
|
|||||||
Transmission
Revenues
|
3
|
|||||||
Other
|
1
|
|||||||
Total
Change in Gross Margin
|
78
|
|||||||
Changes
in Operating Expenses and Other:
|
||||||||
Other
Operation and Maintenance
|
(8 | ) | ||||||
Depreciation
and Amortization
|
(3 | ) | ||||||
Taxes
Other Than Income Taxes
|
6
|
|||||||
Interest
Expense
|
1
|
|||||||
Total
Change in Operating Expenses and Other
|
(4 | ) | ||||||
Income
Tax Expense
|
(26 | ) | ||||||
Second
Quarter of 2007
|
$ |
80
|
·
|
Retail
Margins increased $64 million primarily due to:
|
|
·
|
A
$22 million increase in rate revenues related to a $13 million
increase in
CSPCo’s RSP, a $3 million increase related to recovery of storm costs
and
a $3 million increase related to recovery of IGCC preconstruction
costs. See “Ohio Rate Matters” section of Note
3. The increase in recovery of storm costs was offset by the
amortization of deferred expenses in Other Operation and
Maintenance. The increase in rate recovery of IGCC
preconstruction costs was offset by the amortization of deferred
expenses
in Depreciation and Amortization.
|
|
·
|
A
$20 million decrease in capacity purchases due to changes in relative
peak
demands of AEP Power Pool members under the Interconnection
Agreement.
|
|
·
|
An
$18 million increase in residential and commercial revenue primarily
due
to a 69% increase in cooling degree days.
|
|
·
|
A
$14 million increase in industrial revenue primarily due to the
addition
of Ormet, a major industrial customer. The addition of Ormet
resulted in a $12 million increase in industrial sales. See
“Ormet” section of Note 3.
|
|
·
|
Margins
from Off-system Sales increased $10 million primarily due to higher
power
prices in the east and higher trading margins.
|
|
·
|
Transmission
Revenues increased $3 million primarily due to a provision recorded
in the
second quarter of 2006 related to potential SECA refunds. See
“Transmission Rate Proceedings at the FERC” section of Note
3.
|
·
|
Other
Operation and Maintenance expenses increased $8 million primarily
due
to:
|
|
|
·
|
A
$4 million increase in expenses related to CSPCo’s PPA for AEGCo’s
Lawrenceburg Plant which began in May 2007.
|
|
·
|
A
$3 million increase in overhead line expenses due in part to the
amortization of deferred storm expenses recovered through a cost-recovery
rider. The increase in amortization of deferred storm expenses
was offset by a corresponding increase in Retail
Margins.
|
|
·
|
A
$3 million increase in net allocated transmission costs related
to the
Transmission Equalization Agreement as a result of the addition
of APCo’s
Wyoming-Jacksons Ferry 765 kV line, which was energized and placed
in
service in June 2006.
|
·
|
Depreciation
and Amortization increased $3 million due to the amortization of
IGCC
preconstruction costs in 2007. The increase in amortization of
IGCC preconstruction costs was offset by a corresponding increase
in
Retail Margins.
|
|
·
|
Taxes
Other Than Income Taxes decreased $6 million due to a favorable
true-up of
property taxes recorded in 2007 compared to an unfavorable true-up
recorded in 2006, partially offset by an increase in state excise
taxes.
|
Six
Months Ended June 30, 2006
|
$ |
84
|
||||||
Changes
in Gross Margin:
|
||||||||
Retail
Margins
|
91
|
|||||||
Off-system
Sales
|
(1 | ) | ||||||
Transmission
Revenues
|
(4 | ) | ||||||
Other
|
(3 | ) | ||||||
Total
Change in Gross Margin
|
83
|
|||||||
Changes
in Operating Expenses and Other:
|
||||||||
Other
Operation and Maintenance
|
(18 | ) | ||||||
Depreciation
and Amortization
|
(7 | ) | ||||||
Taxes
Other Than Income Taxes
|
5
|
|||||||
Interest
Expense
|
3
|
|||||||
Total
Change in Operating Expenses and Other
|
(17 | ) | ||||||
Income
Tax Expense
|
(23 | ) | ||||||
Six
Months Ended June 30, 2007
|
$ |
127
|
·
|
Retail
Margins increased $91 million primarily due to:
|
|
·
|
A
$36 million increase in rate revenues related to a $18 million
increase in
CSPCo’s RSP, a $6 million increase related to recovery of storm costs
and
a $6 million increase related to recovery of IGCC preconstruction
costs. See “Ohio Rate Matters” section of Note
3. The increase in rate recovery of storm costs was offset by
the amortization of deferred expenses in Other Operation and
Maintenance. The increase in rate recovery of IGCC
preconstruction costs was offset by the amortization of deferred
expenses
in Depreciation and Amortization.
|
|
·
|
A
$28 million increase in residential and commercial revenue primarily
due
to a 72% increase in cooling degree days.
|
|
·
|
A
$21 million increase in industrial revenue primarily due to the
addition
of Ormet, a major industrial customer. The addition of Ormet
resulted in a $19 million increase in industrial sales. See
“Ormet” section of Note 3.
|
|
·
|
An
$18 million decrease in capacity purchases due to changes in relative
peak
demands of AEP Power Pool members under the Interconnection
Agreement.
|
|
·
|
Transmission
Revenues decreased $4 million primarily due to the elimination
of SECA
revenues as of April 1, 2006 offset by a provision recorded in
the second
quarter of 2006 related to potential SECA
refunds. See “Transmission Rate Proceedings at the
FERC” section of Note 3.
|
|
·
|
Other
revenues decreased $3 million primarily due to lower gains on sales
of
emission allowances.
|
·
|
Other
Operation and Maintenance expenses increased $18 million primarily
due
to:
|
|
·
|
An
$8 million increase in overhead line expenses primarily due to
a $6
million increase in amortization of deferred storm expenses recovered
through a cost-recovery rider. The increase in amortization of
deferred storm expenses was offset by a corresponding increase
in Retail
Margins.
|
|
·
|
A
$6 million increase in net allocated transmission costs related
to the
Transmission Equalization Agreement as a result of the addition
of APCo’s
Wyoming-Jacksons Ferry 765 kV line, which was energized and placed
in
service in June 2006.
|
|
·
|
A
$4 million increase in expenses related to CSPCo’s PPA for AEGCo’s
Lawrenceburg Plant which began in May 2007.
|
|
·
|
Depreciation
and Amortization increased $7 million primarily due to the amortization
of
IGCC preconstruction costs of $6 million in 2007. The increase
in amortization of IGCC preconstruction costs was offset by a
corresponding increase in Retail Margins.
|
|
·
|
Taxes
Other Than Income Taxes decreased $5 million due to a favorable
true-up of
property taxes recorded in 2007 compared to an unfavorable true-up
recorded in 2006, partially offset by an increase in state excise
taxes.
|
|
·
|
Interest
Expense decreased $3 million primarily due to an increase in allowance
for
borrowed funds used during
construction.
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
REVENUES
|
||||||||||||||||
Electric
Generation, Transmission and Distribution
|
$ |
469,648
|
$ |
394,110
|
$ |
893,114
|
$ |
807,779
|
||||||||
Sales
to AEP Affiliates
|
35,356
|
21,762
|
58,369
|
35,531
|
||||||||||||
Other
|
1,018
|
1,237
|
2,451
|
2,567
|
||||||||||||
TOTAL
|
506,022
|
417,109
|
953,934
|
845,877
|
||||||||||||
EXPENSES
|
||||||||||||||||
Fuel
and Other Consumables Used for Electric Generation
|
76,342
|
71,213
|
152,204
|
141,033
|
||||||||||||
Purchased
Electricity for Resale
|
32,835
|
27,688
|
64,146
|
52,453
|
||||||||||||
Purchased
Electricity from AEP Affiliates
|
87,788
|
87,188
|
171,329
|
169,665
|
||||||||||||
Other
Operation
|
62,516
|
57,860
|
123,675
|
113,805
|
||||||||||||
Maintenance
|
26,723
|
23,502
|
49,287
|
41,436
|
||||||||||||
Depreciation
and Amortization
|
49,446
|
46,540
|
99,743
|
92,368
|
||||||||||||
Taxes
Other Than Income Taxes
|
35,796
|
41,787
|
76,378
|
81,289
|
||||||||||||
TOTAL
|
371,446
|
355,778
|
736,762
|
692,049
|
||||||||||||
OPERATING
INCOME
|
134,576
|
61,331
|
217,172
|
153,828
|
||||||||||||
Other
Income (Expense):
|
||||||||||||||||
Interest
Income
|
194
|
475
|
616
|
930
|
||||||||||||
Carrying
Costs Income
|
1,139
|
1,320
|
2,231
|
2,036
|
||||||||||||
Allowance
for Equity Funds Used During Construction
|
620
|
343
|
1,392
|
807
|
||||||||||||
Interest
Expense
|
(16,382 | ) | (16,914 | ) | (31,663 | ) | (34,434 | ) | ||||||||
INCOME
BEFORE INCOME TAXES
|
120,147
|
46,555
|
189,748
|
123,167
|
||||||||||||
Income
Tax Expense
|
40,125
|
14,293
|
62,745
|
39,568
|
||||||||||||
NET INCOME | 80,022 | 32,262 | 127,003 | 83,599 | ||||||||||||
Capital
Stock Expense
|
40
|
40
|
79
|
79
|
||||||||||||
EARNINGS
APPLICABLE TO COMMON STOCK
|
$ | 79,982 | $ | 32,222 | $ | 126,924 | $ | 83,520 |
Common
Stock
|
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other Comprehensive Income (Loss)
|
Total
|
||||||||||||||||
DECEMBER
31, 2005
|
$ |
41,026
|
$ |
580,035
|
$ |
361,365
|
$ | (880 | ) | $ |
981,546
|
|||||||||
Common
Stock Dividends
|
(45,000 | ) | (45,000 | ) | ||||||||||||||||
Capital
Stock Expense
|
79
|
(79 | ) |
-
|
||||||||||||||||
TOTAL
|
936,546
|
|||||||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||||||
Other
Comprehensive Income, Net of Taxes:
|
||||||||||||||||||||
Cash
Flow Hedges, Net of Tax of $3,695
|
6,861
|
6,861
|
||||||||||||||||||
NET
INCOME
|
83,599
|
83,599
|
||||||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
90,460
|
|||||||||||||||||||
JUNE
30, 2006
|
$ |
41,026
|
$ |
580,114
|
$ |
399,885
|
$ |
5,981
|
$ |
1,027,006
|
||||||||||
DECEMBER
31, 2006
|
$ |
41,026
|
$ |
580,192
|
$ |
456,787
|
$ | (21,988 | ) | $ |
1,056,017
|
|||||||||
FIN
48 Adoption, Net of Tax
|
(3,022 | ) | (3,022 | ) | ||||||||||||||||
Common
Stock Dividends
|
(40,000 | ) | (40,000 | ) | ||||||||||||||||
Capital
Stock Expense
|
79
|
(79 | ) |
-
|
||||||||||||||||
TOTAL
|
1,012,995
|
|||||||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||||||
Other
Comprehensive Income, Net of Taxes:
|
||||||||||||||||||||
Cash
Flow Hedges, Net of Tax of $360
|
669
|
669
|
||||||||||||||||||
NET
INCOME
|
127,003
|
127,003
|
||||||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
127,672
|
|||||||||||||||||||
JUNE
30, 2007
|
$ |
41,026
|
$ |
580,271
|
$ |
540,689
|
$ | (21,319 | ) | $ |
1,140,667
|
2007
|
2006
|
|||||||
CURRENT
ASSETS
|
||||||||
Cash
and Cash Equivalents
|
$ |
1,065
|
$ |
1,319
|
||||
Accounts
Receivable:
|
||||||||
Customers
|
51,013
|
49,362
|
||||||
Affiliated Companies
|
35,509
|
62,866
|
||||||
Accrued Unbilled Revenues
|
18,760
|
11,042
|
||||||
Miscellaneous
|
6,266
|
4,895
|
||||||
Allowance for Uncollectible Accounts
|
(707 | ) | (546 | ) | ||||
Total
Accounts Receivable
|
110,841
|
127,619
|
||||||
Fuel
|
41,922
|
37,348
|
||||||
Materials
and Supplies
|
36,267
|
31,765
|
||||||
Emission
Allowances
|
6,328
|
3,493
|
||||||
Risk
Management Assets
|
45,433
|
66,238
|
||||||
Prepayments
and Other
|
10,397
|
20,870
|
||||||
TOTAL
|
252,253
|
288,652
|
||||||
PROPERTY,
PLANT AND EQUIPMENT
|
||||||||
Electric:
|
||||||||
Production
|
2,051,385
|
1,896,073
|
||||||
Transmission
|
491,245
|
479,119
|
||||||
Distribution
|
1,514,251
|
1,475,758
|
||||||
Other
|
202,545
|
191,103
|
||||||
Construction
Work in Progress
|
322,114
|
294,138
|
||||||
Total
|
4,581,540
|
4,336,191
|
||||||
Accumulated
Depreciation and Amortization
|
1,647,537
|
1,611,043
|
||||||
TOTAL
- NET
|
2,934,003
|
2,725,148
|
||||||
OTHER
NONCURRENT ASSETS
|
||||||||
Regulatory
Assets
|
271,205
|
298,304
|
||||||
Long-term
Risk Management Assets
|
46,558
|
56,206
|
||||||
Deferred
Charges and Other
|
114,735
|
152,379
|
||||||
TOTAL
|
432,498
|
506,889
|
||||||
TOTAL
ASSETS
|
$ |
3,618,754
|
$ |
3,520,689
|
2007
|
2006
|
|||||||
CURRENT
LIABILITIES
|
(in
thousands)
|
|||||||
Advances
from Affiliates
|
$ |
64,003
|
$ |
696
|
||||
Accounts
Payable:
|
||||||||
General
|
104,586
|
112,431
|
||||||
Affiliated
Companies
|
42,580
|
59,538
|
||||||
Long-term
Debt Due Within One Year - Nonaffiliated
|
112,000
|
-
|
||||||
Risk
Management Liabilities
|
32,018
|
49,285
|
||||||
Customer
Deposits
|
50,686
|
34,991
|
||||||
Accrued
Taxes
|
158,915
|
166,551
|
||||||
Accrued
Interest
|
23,155
|
20,868
|
||||||
Other
|
38,262
|
37,143
|
||||||
TOTAL
|
626,205
|
481,503
|
||||||
NONCURRENT
LIABILITIES
|
||||||||
Long-term
Debt – Nonaffiliated
|
985,523
|
1,097,322
|
||||||
Long-term
Debt – Affiliated
|
100,000
|
100,000
|
||||||
Long-term
Risk Management Liabilities
|
31,956
|
40,477
|
||||||
Deferred
Income Taxes
|
461,738
|
475,888
|
||||||
Regulatory
Liabilities and Deferred Investment Tax Credits
|
169,757
|
179,048
|
||||||
Deferred
Credits and Other
|
102,908
|
90,434
|
||||||
TOTAL
|
1,851,882
|
1,983,169
|
||||||
TOTAL
LIABILITIES
|
2,478,087
|
2,464,672
|
||||||
Commitments
and Contingencies (Note 4)
|
||||||||
COMMON
SHAREHOLDER’S EQUITY
|
||||||||
Common
Stock – No Par Value:
|
||||||||
Authorized
– 24,000,000 Shares
|
||||||||
Outstanding
– 16,410,426 Shares
|
41,026
|
41,026
|
||||||
Paid-in
Capital
|
580,271
|
580,192
|
||||||
Retained
Earnings
|
540,689
|
456,787
|
||||||
Accumulated
Other Comprehensive Income (Loss)
|
(21,319 | ) | (21,988 | ) | ||||
TOTAL
|
1,140,667
|
1,056,017
|
||||||
TOTAL
LIABILITIES AND SHAREHOLDER’S EQUITY
|
$ |
3,618,754
|
$ |
3,520,689
|
2007
|
2006
|
|||||||
OPERATING
ACTIVITIES
|
||||||||
Net
Income
|
$ |
127,003
|
$ |
83,599
|
||||
Adjustments
for Noncash Items:
|
||||||||
Depreciation
and Amortization
|
99,743
|
92,368
|
||||||
Deferred
Income Taxes
|
(5,077 | ) | (250 | ) | ||||
Carrying
Costs Income
|
(2,231 | ) | (2,036 | ) | ||||
Mark-to-Market
of Risk Management Contracts
|
5,600
|
(466 | ) | |||||
Deferred
Property Taxes
|
39,063
|
30,201
|
||||||
Change
in Other Noncurrent Assets
|
(25,985 | ) | (15,417 | ) | ||||
Change
in Other Noncurrent Liabilities
|
(7,054 | ) |
7,111
|
|||||
Changes
in Certain Components of Working Capital:
|
||||||||
Accounts
Receivable, Net
|
7,678
|
29,274
|
||||||
Fuel,
Materials and Supplies
|
(4,740 | ) | (14,664 | ) | ||||
Accounts
Payable
|
(10,735 | ) |
16,866
|
|||||
Customer
Deposits
|
15,695
|
(14,843 | ) | |||||
Accrued
Taxes, Net
|
5,493
|
(21,909 | ) | |||||
Other
Current Assets
|
5,608
|
24,796
|
||||||
Other
Current Liabilities
|
(1,952 | ) | (1,062 | ) | ||||
Net
Cash Flows From Operating Activities
|
248,109
|
213,568
|
||||||
INVESTING
ACTIVITIES
|
||||||||
Construction
Expenditures
|
(169,014 | ) | (137,728 | ) | ||||
Change
in Advances to Affiliates, Net
|
-
|
(12,616 | ) | |||||
Acquisition
of Darby Plant
|
(102,032 | ) |
-
|
|||||
Proceeds
from Sale of Assets
|
842
|
1,976
|
||||||
Other
|
(20 | ) | (1,151 | ) | ||||
Net
Cash Flows Used For Investing Activities
|
(270,224 | ) | (149,519 | ) | ||||
FINANCING
ACTIVITIES
|
||||||||
Change
in Advances from Affiliates, Net
|
63,307
|
(17,609 | ) | |||||
Principal
Payments for Capital Lease Obligations
|
(1,446 | ) | (1,570 | ) | ||||
Dividends
Paid on Common Stock
|
(40,000 | ) | (45,000 | ) | ||||
Net
Cash Flows From (Used For) Financing Activities
|
21,861
|
(64,179 | ) | |||||
Net
Decrease in Cash and Cash Equivalents
|
(254 | ) | (130 | ) | ||||
Cash
and Cash Equivalents at Beginning of Period
|
1,319
|
940
|
||||||
Cash
and Cash Equivalents at End of Period
|
$ |
1,065
|
$ |
810
|
||||
SUPPLEMENTARY
INFORMATION
|
||||||||
Cash
Paid for Interest, Net of Capitalized Amounts
|
$ |
31,557
|
$ |
32,374
|
||||
Net
Cash Paid for Income Taxes
|
1,704
|
10,713
|
||||||
Noncash
Acquisitions Under Capital Leases
|
1,347
|
1,648
|
||||||
Construction
Expenditures Included in Accounts Payable at June 30,
|
30,659
|
12,601
|
||||||
Noncash
Assumption of Liabilities Related to Acquisition of Darby
Plant
|
2,339
|
-
|
||||||
See
Condensed Notes to Condensed Financial Statements of Registrant
Subsidiaries.
|
Footnote
Reference
|
|
Significant
Accounting Matters
|
Note
1
|
New
Accounting Pronouncements and Extraordinary Item
|
Note
2
|
Rate
Matters
|
Note
3
|
Commitments,
Guarantees and Contingencies
|
Note
4
|
Acquisition
|
Note
5
|
Benefit
Plans
|
Note
6
|
Business
Segments
|
Note
7
|
Income
Taxes
|
Note
8
|
Financing
Activities
|
Note
9
|
Second
Quarter of 2006
|
$ |
29
|
||||||
Changes
in Gross Margin:
|
||||||||
Retail
Margins
|
(7 | ) | ||||||
FERC
Municipals and Cooperatives
|
16
|
|||||||
Off-system
Sales
|
6
|
|||||||
Transmission
Revenues
|
6
|
|||||||
Other
|
2
|
|||||||
Total
Change in Gross Margin
|
23
|
|||||||
Changes
in Operating Expenses and Other:
|
||||||||
Other
Operation and Maintenance
|
(13 | ) | ||||||
Depreciation
and Amortization
|
(3 | ) | ||||||
Other
Income
|
(1 | ) | ||||||
Interest
Expense
|
(2 | ) | ||||||
Total
Change in Operating Expenses and Other
|
(19 | ) | ||||||
Income
Tax Expense
|
(3 | ) | ||||||
Second
Quarter of 2007
|
$ |
30
|
·
|
Retail
Margins decreased $7 million primarily due to a $12 million reduction
in
capacity settlement revenues under the Interconnection Agreement
reflecting I&M’s new peak demand in July 2006 and lower revenues from
financial transmission rights, net of congestion, of $7 million
due to
fewer constraints in the PJM market. Higher retail sales of $14
million reflecting favorable weather conditions partially offset
the
decreases. Heating and cooling degree days increased
significantly in both the Indiana and Michigan
jurisdictions.
|
·
|
FERC
Municipals and Cooperatives margins increased $16 million due to
the
addition of new municipal contracts including new rates and increased
demand effective July 2006 and January 2007.
|
·
|
Margins
from Off-system Sales increased $6 million primarily due to higher
power
prices in the east and higher trading margins.
|
·
|
Transmission
Revenues increased $6 million primarily due to a provision recorded
in the
second quarter of 2006 for potential SECA refunds. See
“Transmission Rate Proceedings at the FERC” section of Note
3.
|
·
|
Other
Operation and Maintenance expenses increased $13 million primarily
due to
a $7 million increase in coal-fired steam plant maintenance expenses
resulting from a planned outage at the Rockport Plant and
a $4 million increase in transmission expense due to
reduced credits under the Transmission Equalization
Agreement. Credits decreased due to I&M’s July 2006 peak
and due to APCo’s addition of the Wyoming-Jacksons Ferry 765 kV line,
which was energized and placed in service in June 2006 thus decreasing
I&M’s share of the transmission investment pool.
|
·
|
Depreciation
and Amortization expense increased $3 million primarily due to
a $2
million increase in amortization related to capitalized software
development costs and a $1 million increase in depreciation related
to
capital additions.
|
·
|
Interest
Expense increased $2 million primarily due to an increase in outstanding
long-term debt and higher interest
rates.
|
Six
Months Ended June 30, 2006
|
$ |
86
|
||||||
Changes
in Gross Margin:
|
||||||||
Retail
Margins
|
(30 | ) | ||||||
FERC
Municipals and Cooperatives
|
25
|
|||||||
Off-system
Sales
|
2
|
|||||||
Transmission
Revenues
|
4
|
|||||||
Other
|
(5 | ) | ||||||
Total
Change in Gross Margin
|
(4 | ) | ||||||
Changes
in Operating Expenses and Other:
|
||||||||
Other
Operation and Maintenance
|
(20 | ) | ||||||
Depreciation
and Amortization
|
(10 | ) | ||||||
Taxes
Other Than Income Taxes
|
1
|
|||||||
Other
Income
|
(2 | ) | ||||||
Interest
Expense
|
(4 | ) | ||||||
Total
Change in Operating Expenses and Other
|
(35 | ) | ||||||
Income
Tax Expense
|
12
|
|||||||
Six
Months Ended June 30, 2007
|
$ |
59
|
·
|
Retail
Margins decreased $30 million primarily due to a $35 million reduction
in
capacity settlement revenues under the Interconnection Agreement
reflecting I&M’s new peak demand in July 2006 and lower revenues from
financial transmission rights, net of congestion, of $16 million
due to
fewer constraints in the PJM market. Higher retail sales of $27
million reflecting favorable weather conditions partially offset
the
decreases. Heating and cooling degree days increased
significantly in both the Indiana and Michigan
jurisdictions.
|
·
|
FERC
Municipals and Cooperatives margins increased $25 million due to
the
addition of new municipal contracts including new rates and increased
demand effective July 2006 and January 2007.
|
·
|
Transmission
Revenues increased $4 million primarily due to a provision recorded
in the
second quarter of 2006 for potential SECA refunds. See
“Transmission Rate Proceedings at the FERC” section of Note
3.
|
·
|
Other
revenues decreased $5 million primarily due to decreased River
Transportation Division (RTD) revenues for barging coal and decreased
gains on sales of emission allowances. RTD related expenses
which offset the RTD revenue decrease are included in Other Operation
on
the Condensed Consolidated Statements of Income resulting in earning
only
a return approved under regulatory
order.
|
·
|
Other Operation
and Maintenance expenses increased $20 million primarily due to
a $10
million increase in coal-fired plant maintenance expenses resulting
from
planned outages at Rockport and Tanners Creek plants and a $10
million
increase in transmission expense due to reduced credits under the
Transmission Equalization Agreement. Credits decreased due to
I&M’s July 2006 peak and due to APCo’s addition of the
Wyoming-Jacksons Ferry 765 kV line, which was energized and placed
in
service in June 2006 thus decreasing I&M’s share of the transmission
investment pool.
|
·
|
Depreciation
and Amortization expense increased $10 million primarily due to
a $6
million increase in depreciation related to capital additions and
a $4
million increase in amortization related to capitalized software
development costs.
|
·
|
Interest
Expense increased $4 million primarily due to an increase in outstanding
long-term debt and higher interest
rates.
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
REVENUES
|
||||||||||||||||
Electric
Generation, Transmission and Distribution
|
$ |
402,152
|
$ |
371,581
|
$ |
807,316
|
$ |
775,350
|
||||||||
Sales
to AEP Affiliates
|
62,962
|
80,401
|
130,391
|
168,935
|
||||||||||||
Other
– Affiliated
|
14,571
|
9,841
|
27,238
|
24,935
|
||||||||||||
Other
– Nonaffiliated
|
6,352
|
7,631
|
13,961
|
16,013
|
||||||||||||
TOTAL
|
486,037
|
469,454
|
978,906
|
985,233
|
||||||||||||
EXPENSES
|
||||||||||||||||
Fuel
and Other Consumables Used for Electric Generation
|
90,650
|
96,147
|
186,767
|
185,599
|
||||||||||||
Purchased
Electricity for Resale
|
19,310
|
15,533
|
37,250
|
26,543
|
||||||||||||
Purchased
Electricity from AEP Affiliates
|
75,791
|
80,830
|
153,304
|
167,252
|
||||||||||||
Other
Operation
|
117,311
|
109,388
|
238,044
|
221,005
|
||||||||||||
Maintenance
|
45,725
|
40,352
|
88,155
|
85,571
|
||||||||||||
Depreciation
and Amortization
|
53,890
|
50,778
|
110,197
|
100,493
|
||||||||||||
Taxes
Other Than Income Taxes
|
19,238
|
18,965
|
37,232
|
37,871
|
||||||||||||
TOTAL
|
421,915
|
411,993
|
850,949
|
824,334
|
||||||||||||
OPERATING
INCOME
|
64,122
|
57,461
|
127,957
|
160,899
|
||||||||||||
Other
Income (Expense):
|
||||||||||||||||
Interest
Income
|
707
|
663
|
1,295
|
1,357
|
||||||||||||
Allowance
for Equity Funds Used During Construction
|
727
|
1,440
|
992
|
3,364
|
||||||||||||
Interest
Expense
|
(19,611 | ) | (17,902 | ) | (39,432 | ) | (35,435 | ) | ||||||||
INCOME
BEFORE INCOME TAXES
|
45,945
|
41,662
|
90,812
|
130,185
|
||||||||||||
Income
Tax Expense
|
15,910
|
13,137
|
31,314
|
43,782
|
||||||||||||
NET
INCOME
|
30,035
|
28,525
|
59,498
|
86,403
|
||||||||||||
Preferred
Stock Dividend Requirements
|
85
|
85
|
170
|
170
|
||||||||||||
EARNINGS
APPLICABLE TO COMMON STOCK
|
$ |
29,950
|
$ |
28,440
|
$ |
59,328
|
$ |
86,233
|
Common
Stock
|
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other Comprehensive Income (Loss)
|
Total
|
||||||||||||||||
DECEMBER
31, 2005
|
$ |
56,584
|
$ |
861,290
|
$ |
305,787
|
$ | (3,569 | ) | $ |
1,220,092
|
|||||||||
Common
Stock Dividends
|
(20,000 | ) | (20,000 | ) | ||||||||||||||||
Preferred
Stock Dividends
|
(170 | ) | (170 | ) | ||||||||||||||||
TOTAL
|
1,199,922
|
|||||||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||||||
Other
Comprehensive Income, Net of Taxes:
|
||||||||||||||||||||
Cash
Flow Hedges, Net of Tax of $4,685
|
8,701
|
8,701
|
||||||||||||||||||
NET
INCOME
|
86,403
|
86,403
|
||||||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
95,104
|
|||||||||||||||||||
JUNE
30, 2006
|
$ |
56,584
|
$ |
861,290
|
$ |
372,020
|
$ |
5,132
|
$ |
1,295,026
|
||||||||||
DECEMBER
31, 2006
|
$ |
56,584
|
$ |
861,290
|
$ |
386,616
|
$ | (15,051 | ) | $ |
1,289,439
|
|||||||||
FIN
48 Adoption, Net of Tax
|
327
|
327
|
||||||||||||||||||
Common
Stock Dividends
|
(20,000 | ) | (20,000 | ) | ||||||||||||||||
Preferred
Stock Dividends
|
(170 | ) | (170 | ) | ||||||||||||||||
Gain
on Reacquired Preferred Stock
|
1
|
1
|
||||||||||||||||||
TOTAL
|
1,269,597
|
|||||||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||||||
Other
Comprehensive Income, Net of Taxes:
|
||||||||||||||||||||
Cash
Flow Hedges, Net of Tax of $649
|
1,206
|
1,206
|
||||||||||||||||||
NET
INCOME
|
59,498
|
59,498
|
||||||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
60,704
|
|||||||||||||||||||
JUNE
30, 2007
|
$ |
56,584
|
$ |
861,291
|
$ |
426,271
|
$ | (13,845 | ) | $ |
1,330,301
|
2007
|
2006
|
|||||||
CURRENT
ASSETS
|
||||||||
Cash
and Cash Equivalents
|
$ |
607
|
$ |
1,369
|
||||
Accounts
Receivable:
|
||||||||
Customers
|
74,465
|
82,102
|
||||||
Affiliated
Companies
|
68,135
|
108,288
|
||||||
Accrued
Unbilled Revenues
|
3,947
|
2,206
|
||||||
Miscellaneous
|
1,648
|
1,838
|
||||||
Allowance
for Uncollectible Accounts
|
(729 | ) | (601 | ) | ||||
Total
Accounts Receivable
|
147,466
|
193,833
|
||||||
Fuel
|
51,416
|
64,669
|
||||||
Materials
and Supplies
|
137,849
|
129,953
|
||||||
Risk
Management Assets
|
47,684
|
69,752
|
||||||
Accrued
Tax Benefits
|
-
|
27,378
|
||||||
Prepayments
and Other
|
9,740
|
15,170
|
||||||
TOTAL
|
394,762
|
502,124
|
||||||
PROPERTY,
PLANT AND EQUIPMENT
|
||||||||
Electric:
|
||||||||
Production
|
3,402,290
|
3,363,813
|
||||||
Transmission
|
1,062,935
|
1,047,264
|
||||||
Distribution
|
1,159,964
|
1,102,033
|
||||||
Other
(including nuclear fuel and coal mining)
|
556,848
|
529,727
|
||||||
Construction
Work in Progress
|
150,684
|
183,893
|
||||||
Total
|
6,332,721
|
6,226,730
|
||||||
Accumulated
Depreciation, Depletion and Amortization
|
2,970,351
|
2,914,131
|
||||||
TOTAL
- NET
|
3,362,370
|
3,312,599
|
||||||
OTHER
NONCURRENT ASSETS
|
||||||||
Regulatory
Assets
|
274,468
|
314,805
|
||||||
Spent
Nuclear Fuel and Decommissioning Trusts
|
1,310,871
|
1,248,319
|
||||||
Long-term
Risk Management Assets
|
48,908
|
59,137
|
||||||
Deferred
Charges and Other
|
108,343
|
109,453
|
||||||
TOTAL
|
1,742,590
|
1,731,714
|
||||||
TOTAL
ASSETS
|
$ |
5,499,722
|
$ |
5,546,437
|
2007
|
2006
|
|||||||
CURRENT
LIABILITIES
|
(in
thousands)
|
|||||||
Advances
from Affiliates
|
$ |
14,941
|
$ |
91,173
|
||||
Accounts
Payable:
|
||||||||
General
|
120,551
|
146,733
|
||||||
Affiliated
Companies
|
53,583
|
65,497
|
||||||
Long-term
Debt Due Within One Year – Nonaffiliated
|
-
|
50,000
|
||||||
Risk
Management Liabilities
|
33,508
|
52,083
|
||||||
Customer
Deposits
|
36,490
|
34,946
|
||||||
Accrued
Taxes
|
100,860
|
59,652
|
||||||
Other
|
113,497
|
128,461
|
||||||
TOTAL
|
473,430
|
628,545
|
||||||
NONCURRENT
LIABILITIES
|
||||||||
Long-term
Debt – Nonaffiliated
|
1,561,600
|
1,505,135
|
||||||
Long-term
Risk Management Liabilities
|
33,545
|
42,641
|
||||||
Deferred
Income Taxes
|
305,148
|
335,000
|
||||||
Regulatory
Liabilities and Deferred Investment Tax Credits
|
784,082
|
753,402
|
||||||
Asset
Retirement Obligations
|
831,051
|
809,853
|
||||||
Deferred
Credits and Other
|
172,485
|
174,340
|
||||||
TOTAL
|
3,687,911
|
3,620,371
|
||||||
TOTAL
LIABILITIES
|
4,161,341
|
4,248,916
|
||||||
Cumulative
Preferred Stock Not Subject to Mandatory Redemption
|
8,080
|
8,082
|
||||||
Commitments
and Contingencies (Note 4)
|
||||||||
COMMON
SHAREHOLDER’S EQUITY
|
||||||||
Common
Stock – No Par Value:
|
||||||||
Authorized
– 2,500,000 Shares
|
||||||||
Outstanding
– 1,400,000 Shares
|
56,584
|
56,584
|
||||||
Paid-in
Capital
|
861,291
|
861,290
|
||||||
Retained
Earnings
|
426,271
|
386,616
|
||||||
Accumulated
Other Comprehensive Income (Loss)
|
(13,845 | ) | (15,051 | ) | ||||
TOTAL
|
1,330,301
|
1,289,439
|
||||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$ |
5,499,722
|
$ |
5,546,437
|
2007
|
2006
|
|||||||
OPERATING
ACTIVITIES
|
||||||||
Net
Income
|
$ |
59,498
|
$ |
86,403
|
||||
Adjustments
for Noncash Items:
|
||||||||
Depreciation
and Amortization
|
110,197
|
100,493
|
||||||
Deferred
Income Taxes
|
(9,547 | ) |
9,562
|
|||||
Deferred
Investment Tax Credits
|
(3,471 | ) | (3,640 | ) | ||||
Amortization
(Deferral) of Incremental Nuclear Refueling Outage Expenses,
Net
|
23,099
|
(12,111 | ) | |||||
Amortization
of Nuclear Fuel
|
33,003
|
24,928
|
||||||
Mark-to-Market
of Risk Management Contracts
|
5,607
|
(634 | ) | |||||
Change
in Other Noncurrent Assets
|
(12,308 | ) |
7,630
|
|||||
Change
in Other Noncurrent Liabilities
|
22,896
|
14,701
|
||||||
Changes
in Certain Components of Working Capital:
|
||||||||
Accounts
Receivable, Net
|
36,805
|
56,894
|
||||||
Fuel,
Materials and Supplies
|
9,911
|
(12,092 | ) | |||||
Accounts
Payable
|
(46,049 | ) |
4,221
|
|||||
Customer
Deposits
|
1,544
|
(14,867 | ) | |||||
Accrued
Taxes, Net
|
72,977
|
28,256
|
||||||
Other
Current Assets
|
4,595
|
21,921
|
||||||
Other
Current Liabilities
|
(17,858 | ) | (21,559 | ) | ||||
Net
Cash Flows From Operating Activities
|
290,899
|
290,106
|
||||||
INVESTING
ACTIVITIES
|
||||||||
Construction
Expenditures
|
(124,252 | ) | (169,491 | ) | ||||
Purchases
of Investment Securities
|
(409,163 | ) | (434,212 | ) | ||||
Sales
of Investment Securities
|
370,986
|
405,716
|
||||||
Acquisitions
of Nuclear Fuel
|
(30,498 | ) | (35,195 | ) | ||||
Other
|
292
|
2,273
|
||||||
Net
Cash Flows Used For Investing Activities
|
(192,635 | ) | (230,909 | ) | ||||
FINANCING
ACTIVITIES
|
||||||||
Issuance
of Long-term Debt – Nonaffiliated
|
-
|
49,745
|
||||||
Change
in Advances from Affiliates, Net
|
(76,232 | ) | (35,953 | ) | ||||
Retirement
of Long-term Debt – Nonaffiliated
|
-
|
(50,000 | ) | |||||
Retirement
of Cumulative Preferred Stock
|
(2 | ) |
-
|
|||||
Principal
Payments for Capital Lease Obligations
|
(2,622 | ) | (3,139 | ) | ||||
Dividends
Paid on Common Stock
|
(20,000 | ) | (20,000 | ) | ||||
Dividends
Paid on Cumulative Preferred Stock
|
(170 | ) | (170 | ) | ||||
Net
Cash Flows Used For Financing Activities
|
(99,026 | ) | (59,517 | ) | ||||
Net
Decrease in Cash and Cash Equivalents
|
(762 | ) | (320 | ) | ||||
Cash
and Cash Equivalents at Beginning of Period
|
1,369
|
854
|
||||||
Cash
and Cash Equivalents at End of Period
|
$ |
607
|
$ |
534
|
||||
SUPPLEMENTARY
INFORMATION
|
||||||||
Cash
Paid for Interest, Net of Capitalized Amounts
|
$ |
32,082
|
$ |
32,959
|
||||
Net
Cash Paid (Received) for Income Taxes
|
(20,001 | ) |
12,031
|
|||||
Noncash
Acquisitions Under Capital Leases
|
1,160
|
3,185
|
||||||
Construction
Expenditures Included in Accounts Payable at June 30,
|
24,145
|
18,031
|
||||||
Acquisition
of Nuclear Fuel in Accounts Payable at June 30,
|
30,867
|
25,780
|
||||||
See
Condensed Notes to Condensed Financial Statements of Registrant
Subsidiaries.
|
Footnote
Reference
|
|
Significant
Accounting Matters
|
Note
1
|
New
Accounting Pronouncements and Extraordinary Item
|
Note
2
|
Rate
Matters
|
Note
3
|
Commitments,
Guarantees and Contingencies
|
Note
4
|
Benefit
Plans
|
Note
6
|
Business
Segments
|
Note
7
|
Income
Taxes
|
Note
8
|
Financing
Activities
|
Note
9
|
Second
Quarter of 2006
|
$ |
23
|
||||||
Changes
in Gross Margin:
|
||||||||
Retail
Margins
|
59
|
|||||||
Off-system
Sales
|
4
|
|||||||
Transmission
Revenues
|
4
|
|||||||
Other
|
(4 | ) | ||||||
Total
Change in Gross Margin
|
63
|
|||||||
Changes
in Operating Expenses and Other:
|
||||||||
Other
Operation and Maintenance
|
33
|
|||||||
Depreciation
and Amortization
|
(7 | ) | ||||||
Taxes
Other Than Income Taxes
|
(2 | ) | ||||||
Interest
Expense
|
(9 | ) | ||||||
Total
Change in Operating Expenses and Other
|
15
|
|||||||
Income
Tax Expense
|
(27 | ) | ||||||
Second
Quarter of 2007
|
$ |
74
|
·
|
Retail
Margins increased $59 million primarily due to the
following:
|
|
·
|
A
$16 million increase in capacity settlements under the Interconnection
Agreement related to certain affiliates’ peaks and the June 2006
expiration of OPCo’s supplemental capacity and energy obligation to
Buckeye Power, Inc. under the Cardinal Station
Agreement.
|
|
·
|
A
$14 million increase in industrial revenue primarily due to the
addition
of Ormet, a major industrial customer. The addition of Ormet
resulted in a $12 million increase in industrial sales. See
“Ormet” section of Note 3.
|
|
·
|
A
$13 million increase in rate revenues primarily related to an $11
million
increase in OPCo’s RSP, a $3 million increase related to rate recovery of
storm costs and a $3 million increase related to rate recovery
of IGCC
preconstruction costs. See “Ohio Rate Matters” section of Note
3. The increase in rate recovery of storm costs was offset by
the amortization of deferred expenses in Other Operation and
Maintenance. The increase in rate recovery of IGCC
preconstruction costs was offset by the amortization of deferred
expenses
in Depreciation and Amortization.
|
|
·
|
A
$13 million increase in residential and commercial revenue primarily
due
to a 71% increase in cooling degree days.
|
|
·
|
A
$12 million increase in fuel margins.
|
|
·
|
Margins
from Off-system Sales increased $4 million primarily due to a $15
million
increase in trading margins as the result of higher power prices
in the
east offset by an $8 million decrease related to OPCo’s purchase power and
sale agreement with Dow Chemical Company (Dow) which ended in November
2006 and a $3 million decrease in OPCo’s allocated share of off-system
sales revenue due to an affiliate’s new peak. Margins related
to Dow were offset by a corresponding decrease in Other Operation
and
Maintenance expenses. See “OPCo Indemnification Agreement with
AEP Resources” section of Note 16 in the 2006 Annual Report for further
discussion related to Dow.
|
|
·
|
Transmission
Revenues increased $4 million primarily due to a provision recorded
in the
second quarter of 2006 related to potential SECA refunds. See
“Transmission Rate Proceedings at the FERC” section of Note
3.
|
|
·
|
Other
revenues decreased $4 million primarily due to a $3 million decrease
related to the April 2006 expiration of an obligation to sell supplemental
capacity and energy to Buckeye Power, Inc. under the Cardinal Station
Agreement and a $1 million decrease in gains on sales of emission
allowances.
|
·
|
Other
Operation and Maintenance expenses decreased $33 million primarily
due
to:
|
|
·
|
An
$18 million decrease in maintenance from planned and forced outages
at the
Gavin, Muskingum River, Kammer and Sporn Plants related to boiler
tube
inspections in 2006.
|
|
·
|
An
$8 million decrease due to the absence of maintenance and rental
expenses
related to OPCo’s purchase power and sale agreement with Dow which ended
in November 2006. The decrease in Other Operation and
Maintenance expenses related to Dow were offset by a corresponding
decrease in margins from Off-system Sales.
|
|
·
|
A
$5 million decrease in removal costs at the Mitchell, Sporn and
Amos
Plants related to outages in 2006.
|
|
These
amounts were offset by:
|
||
·
|
A
$3 million increase in overhead line expenses due in part to the
amortization of deferred storm expenses recovered through a cost-recovery
rider. The increase was offset by a corresponding increase in
Retail Margins.
|
|
·
|
Depreciation
and Amortization increased $7 million primarily due to a $6 million
increase in depreciation related to environmental improvements
placed in
service at the Mitchell Plant and the amortization of IGCC preconstruction
costs of $3 million. These increases were offset by a $2
million decrease in amortization of a regulatory liability related
to
Ormet. See “Ormet” section of Note 3. The increase
in amortization of IGCC preconstruction costs was offset by a
corresponding increase in Retail Margins.
|
|
·
|
Interest
Expense increased $9 million due to long-term debt issuances since
May
2006.
|
Six
Months Ended June 30, 2006
|
$ |
118
|
||||||
Changes
in Gross Margin:
|
||||||||
Retail
Margins
|
118
|
|||||||
Off-system
Sales
|
(17 | ) | ||||||
Transmission
Revenues
|
(6 | ) | ||||||
Other
|
(14 | ) | ||||||
Total
Change in Gross Margin
|
81
|
|||||||
Changes
in Operating Expenses and Other:
|
||||||||
Other
Operation and Maintenance
|
5
|
|||||||
Depreciation
and Amortization
|
(12 | ) | ||||||
Taxes
Other Than Income Taxes
|
(3 | ) | ||||||
Interest
Expense
|
(12 | ) | ||||||
Total
Change in Operating Expenses and Other
|
(22 | ) | ||||||
Income
Tax Expense
|
(23 | ) | ||||||
Six
Months Ended June 30, 2007
|
$ |
154
|
·
|
Retail
Margins increased $118 million primarily due to the
following:
|
|
·
|
A
$41 million increase in capacity settlements under the Interconnection
Agreement related to certain affiliates’ peaks and the June 2006
expiration of OPCo’s supplemental capacity and energy obligation to
Buckeye Power, Inc. under the Cardinal Station
Agreement.
|
|
·
|
A
$35 million increase in rate revenues primarily related to a $20
million
increase in OPCo’s RSP, a $6 million increase related to rate recovery of
storm costs and a $6 million increase related to rate recovery
of IGCC
preconstruction costs. See “Ohio Rate Matters” section of Note
3. The increase in rate recovery of storm costs was offset by
the amortization of deferred expenses in Other Operation and
Maintenance. The increase in rate recovery of IGCC
preconstruction costs was offset by the amortization of deferred
expenses
in Depreciation and Amortization.
|
|
·
|
A
$20 million increase in residential and commercial revenue primarily
due
to a 73% increase in cooling degree days.
|
|
·
|
An
$18 million increase in industrial revenue due to the addition
of Ormet, a
major industrial customer. See “Ormet” section of Note
3.
|
|
These
increases were partially offset by:
|
||
·
|
An
$8 million decrease in revenues associated with SO2
allowances
received in 2006 from Buckeye Power, Inc. under the Cardinal Station
Allowances Agreement.
|
|
·
|
Margins
from Off-system Sales decreased $17 million primarily due to a
$20 million
decrease in OPCo’s allocated share of off-system sales revenues due to an
affiliate’s new peak and a $9 million decrease in margins related to
OPCo’s purchase power and sale agreement with Dow which ended in November
2006. These decreases were offset by higher trading margins of
$11 million as the result of higher power prices in the east and
a change
in the allocation of off-system sales margins under the SIA effective
April 1, 2006. Margins related to Dow were offset by a
corresponding decrease in Other Operation and Maintenance
expenses.
|
|
·
|
Transmission
Revenues decreased $6 million primarily due to the elimination
of SECA
revenues as of April 1, 2006 offset by a provision recorded in
the second
quarter of 2006 related to potential SECA refunds. See
“Transmission Rate Proceedings at the FERC” section of Note
3.
|
|
·
|
Other
revenues decreased $14 million primarily due to a $7 million decrease
related to the April 2006 expiration of an obligation to sell supplemental
capacity and energy to Buckeye Power, Inc. under the Cardinal Station
Agreement and a $4 million decrease in gains on sales of emission
allowances.
|
·
|
Other
Operation and Maintenance expenses decreased $5 million primarily
due to
the following:
|
|
·
|
A
$16 million decrease in maintenance from planned and forced outages
at the
Muskingum River, Kammer and Sporn Plants related to boiler tube
inspections in 2006.
|
|
·
|
A
$9 million decrease in maintenance and rental expenses related
to OPCo’s
purchase power and sale agreement with Dow which ended in November
2006. This decrease was offset by a corresponding decrease in
margins from Off-system Sales.
|
|
These
decreases were partially offset by:
|
||
·
|
A
$7 million increase in removal costs related to planned and forced
outages
at the Gavin, Mitchell and Cardinal Plants.
|
|
·
|
A
$6 million increase in overhead line expenses due in part to the
amortization of deferred storm expenses recovered through a cost-recovery
rider. The increase was offset by a corresponding increase in
Retail Margins.
|
|
·
|
A
$5 million increase due to the February 2006 adjustment of liabilities
related to sold coal companies.
|
|
·
|
Depreciation
and Amortization increased $12 million primarily due to a $9 million
increase in depreciation related to environmental improvements
placed in
service at the Mitchell Plant and the amortization of IGCC preconstruction
costs of $6 million in 2007. These increases were offset by a
$3 million decrease in amortization of a regulatory liability related
to
Ormet. See “Ormet” section of Note 3. The increase
in amortization of IGCC preconstruction costs was offset by a
corresponding increase in Retail Margins.
|
|
·
|
Interest
Expense increased $12 million primarily due to a $15 million increase
related to long-term debt issuances since May 2006 offset by a
$5 million
increase in allowance for borrowed funds used during
construction.
|
Moody’s
|
S&P
|
Fitch
|
|||
Senior
Unsecured Debt
|
A3
|
BBB
|
BBB+
|
2007
|
2006
|
|||||||
(in
thousands)
|
||||||||
Cash
and Cash Equivalents at Beginning of Period
|
$ |
1,625
|
$ |
1,240
|
||||
Cash
Flows From (Used For):
|
||||||||
Operating
Activities
|
279,029
|
321,944
|
||||||
Investing
Activities
|
(560,262 | ) | (512,468 | ) | ||||
Financing
Activities
|
282,607
|
190,274
|
||||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
1,374
|
(250 | ) | |||||
Cash
and Cash Equivalents at End of Period
|
$ |
2,999
|
$ |
990
|
Principal
Amount
|
Interest
|
Due
|
|||||
Type
of Debt
|
Rate
|
Date
|
|||||
(in
thousands)
|
(%)
|
||||||
Pollution
Control Bonds
|
$
|
65,000
|
4.90
|
2037
|
|||
Senior
Unsecured Notes
|
400,000
|
Variable
|
2010
|
Principal
Amount
|
Interest
|
Due
|
|||||
Type
of Debt
|
Rate
|
Date
|
|||||
(in
thousands)
|
(%)
|
||||||
Notes
Payable – Nonaffiliated
|
$
|
2,927
|
6.81
|
2008
|
|||
Notes
Payable – Nonaffiliated
|
6,000
|
6.27
|
2009
|
MTM
Risk Management Contracts
|
Cash
Flow Hedges
|
DETM
Assignment (a)
|
Total
|
|||||||||||||
Current
Assets
|
$ |
50,040
|
$ |
7,267
|
$ |
-
|
$ |
57,307
|
||||||||
Noncurrent
Assets
|
55,122
|
1,143
|
-
|
56,265
|
||||||||||||
Total
MTM Derivative Contract Assets
|
105,162
|
8,410
|
-
|
113,572
|
||||||||||||
Current
Liabilities
|
(40,629 | ) | (174 | ) | (2,315 | ) | (43,118 | ) | ||||||||
Noncurrent
Liabilities
|
(34,290 | ) | (56 | ) | (4,898 | ) | (39,244 | ) | ||||||||
Total
MTM Derivative Contract Liabilities
|
(74,919 | ) | (230 | ) | (7,213 | ) | (82,362 | ) | ||||||||
Total
MTM Derivative Contract Net Assets
(Liabilities)
|
$ |
30,243
|
$ |
8,180
|
$ | (7,213 | ) | $ |
31,210
|
(a)
|
See
“Natural Gas Contracts with DETM” section of Note 16 in the 2006 Annual
Report.
|
Total
MTM Risk Management Contract Net Assets at December 31,
2006
|
$
|
33,042
|
||
(Gain)
Loss from Contracts Realized/Settled During the Period and Entered
in a
Prior Period
|
(5,664
|
)
|
||
Fair
Value of New Contracts at Inception When Entered During the Period
(a)
|
311
|
|||
Net
Option Premiums Paid/(Received) for Unexercised or Unexpired Option
Contracts Entered During the Period
|
332
|
|||
Change
in Fair Value Due to Valuation Methodology Changes on Forward
Contracts
|
-
|
|||
Changes
in Fair Value Due to Market Fluctuations During the Period
(b)
|
2,670
|
|||
Changes
in Fair Value Allocated to Regulated Jurisdictions (c)
|
(448
|
)
|
||
Total
MTM Risk Management Contract Net Assets
|
30,243
|
|||
Net
Cash Flow Hedge Contracts
|
8,180
|
|||
DETM
Assignment (d)
|
(7,213
|
)
|
||
Total
MTM Risk Management Contract Net Assets at June 30,
2007
|
$
|
31,210
|
(a)
|
Reflects
fair value on long-term contracts which are typically with customers
that
seek fixed pricing to limit their risk against fluctuating energy
prices. Inception value is only recorded if observable market
data can be obtained for valuation inputs for the entire contract
term. The contract prices are valued against market curves
associated with the delivery location and delivery
term.
|
(b)
|
Market
fluctuations are attributable to various factors such as supply/demand,
weather, storage, etc.
|
(c)
|
“Changes
in Fair Value Allocated to Regulated Jurisdictions” relates to the net
gains (losses) of those contracts that are not reflected in the
Condensed
Consolidated Statements of Income. These net gains (losses) are
recorded as regulatory liabilities/assets for those subsidiaries
that
operate in regulated jurisdictions.
|
(d)
|
See
“Natural Gas Contracts with DETM” section of Note 16 in the 2006 Annual
Report.
|
·
|
The
method of measuring fair value used in determining the carrying
amount of
total MTM asset or liability (external sources or modeled
internally).
|
·
|
The
maturity, by year, of net assets/liabilities to give an indication
of when
these MTM amounts will settle and generate
cash.
|
Remainder
2007
|
2008
|
2009
|
2010
|
2011
|
After
2011
|
Total
|
||||||||||||||||||||||
Prices
Actively Quoted –Exchange Traded Contracts
|
$ |
3,646
|
$ | (2,762 | ) | $ |
185
|
$ |
-
|
$ |
-
|
$ |
-
|
$ |
1,069
|
|||||||||||||
Prices
Provided by Other External Sources
–
OTC Broker Quotes (a)
|
3,153
|
10,662
|
8,581
|
3,706
|
-
|
-
|
26,102
|
|||||||||||||||||||||
Prices
Based on Models and Other Valuation Methods (b)
|
(1,363 | ) | (2,084 | ) |
1,078
|
3,562
|
810
|
1,069
|
3,072
|
|||||||||||||||||||
Total
|
$ |
5,436
|
$ |
5,816
|
$ |
9,844
|
$ |
7,268
|
$ |
810
|
$ |
1,069
|
$ |
30,243
|
(a)
|
“Prices
Provided by Other External Sources – OTC Broker Quotes” reflects
information obtained from over-the-counter brokers, industry services,
or
multiple-party on-line platforms.
|
(b)
|
“Prices
Based on Models and Other Valuation Methods” is used in absence of
independent information from external sources. Modeled
information is derived using valuation models developed by the
reporting
entity, reflecting when appropriate, option pricing theory, discounted
cash flow concepts, valuation adjustments, etc. and may require
projection
of prices for underlying commodities beyond the period that prices
are
available from third-party sources. In addition, where external
pricing information or market liquidity are limited, such valuations
are
classified as modeled. The determination of the point at which
a market is no longer liquid for placing it in the modeled category
varies
by market. Contract values that are measured using models or
valuation methods other than active quotes or OTC broker quotes
(because
of the lack of such data for all delivery quantities, locations
and
periods) incorporate in the model or other valuation methods, to
the
extent possible, OTC broker quotes and active quotes for deliveries
in
years and at locations for which such quotes are available including
values determinable by other third party
transactions.
|
Power
|
Foreign
Currency
|
Interest
Rate
|
Total
|
|||||||||||||
Beginning
Balance in AOCI December 31, 2006
|
$ |
4,040
|
$ | (331 | ) | $ |
3,553
|
$ |
7,262
|
|||||||
Changes
in Fair Value
|
3,617
|
-
|
563
|
4,180
|
||||||||||||
Reclassifications
from AOCI to Net Income for Cash Flow Hedges Settled
|
(2,810 | ) |
7
|
(406 | ) | (3,209 | ) | |||||||||
Ending
Balance in AOCI June 30, 2007
|
$ |
4,847
|
$ | (324 | ) | $ |
3,710
|
$ |
8,233
|
Six
Months Ended June 30, 2007
|
Twelve
Months Ended December 31, 2006
|
||||||||||||||||
(in
thousands)
|
(in
thousands)
|
||||||||||||||||
End
|
High
|
Average
|
Low
|
End
|
High
|
Average
|
Low
|
||||||||||
$360
|
$2,054
|
$679
|
$195
|
$573
|
$1,451
|
$500
|
$271
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
REVENUES
|
||||||||||||||||
Electric
Generation, Transmission and Distribution
|
$ |
480,445
|
$ |
453,064
|
$ |
972,979
|
$ |
997,703
|
||||||||
Sales
to AEP Affiliates
|
180,205
|
154,648
|
359,099
|
303,907
|
||||||||||||
Other
- Affiliated
|
6,817
|
3,866
|
10,855
|
7,575
|
||||||||||||
Other
- Nonaffiliated
|
3,466
|
4,429
|
7,441
|
9,428
|
||||||||||||
TOTAL
|
670,933
|
616,007
|
1,350,374
|
1,318,613
|
||||||||||||
EXPENSES
|
||||||||||||||||
Fuel
and Other Consumables Used for Electric Generation
|
201,338
|
211,538
|
399,631
|
446,668
|
||||||||||||
Purchased
Electricity for Resale
|
27,868
|
26,313
|
52,722
|
48,027
|
||||||||||||
Purchased
Electricity from AEP Affiliates
|
28,745
|
28,091
|
49,711
|
56,663
|
||||||||||||
Other
Operation
|
86,972
|
99,189
|
189,959
|
185,818
|
||||||||||||
Maintenance
|
50,617
|
71,416
|
109,765
|
118,940
|
||||||||||||
Depreciation
and Amortization
|
84,779
|
77,855
|
169,055
|
156,676
|
||||||||||||
Taxes
Other Than Income Taxes
|
50,320
|
48,536
|
98,705
|
95,689
|
||||||||||||
TOTAL
|
530,639
|
562,938
|
1,069,548
|
1,108,481
|
||||||||||||
OPERATING
INCOME
|
140,294
|
53,069
|
280,826
|
210,132
|
||||||||||||
Other
Income (Expense):
|
||||||||||||||||
Interest
Income
|
472
|
595
|
884
|
1,232
|
||||||||||||
Carrying
Costs Income
|
3,594
|
3,451
|
7,135
|
6,834
|
||||||||||||
Allowance
for Equity Funds Used During Construction
|
446
|
398
|
1,017
|
1,136
|
||||||||||||
Interest
Expense
|
(33,734 | ) | (24,437 | ) | (59,665 | ) | (47,851 | ) | ||||||||
INCOME
BEFORE INCOME TAXES
|
111,072
|
33,076
|
230,197
|
171,483
|
||||||||||||
Income
Tax Expense
|
36,732
|
9,677
|
76,596
|
53,052
|
||||||||||||
NET
INCOME
|
74,340
|
23,399
|
153,601
|
118,431
|
||||||||||||
Preferred
Stock Dividend Requirements
|
183
|
183
|
366
|
366
|
||||||||||||
EARNINGS
APPLICABLE TO COMMON STOCK
|
$ |
74,157
|
$ |
23,216
|
$ |
153,235
|
$ |
118,065
|
Common
Stock
|
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other Comprehensive Income (Loss)
|
Total
|
||||||||||||||||
DECEMBER
31, 2005
|
$ |
321,201
|
$ |
466,637
|
$ |
979,354
|
$ |
755
|
$ |
1,767,947
|
||||||||||
Capital
Contribution From Parent
|
70,000
|
70,000
|
||||||||||||||||||
Preferred
Stock Dividends
|
(366 | ) | (366 | ) | ||||||||||||||||
Gain
on Reacquired Preferred Stock
|
2
|
2
|
||||||||||||||||||
TOTAL
|
1,837,583
|
|||||||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||||||
Other
Comprehensive Income, Net of Taxes:
|
||||||||||||||||||||
Cash
Flow Hedges, Net of Tax of $5,708
|
10,600
|
10,600
|
||||||||||||||||||
NET
INCOME
|
118,431
|
118,431
|
||||||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
129,031
|
|||||||||||||||||||
JUNE
30, 2006
|
$ |
321,201
|
$ |
536,639
|
$ |
1,097,419
|
$ |
11,355
|
$ |
1,966,614
|
||||||||||
DECEMBER
31, 2006
|
$ |
321,201
|
$ |
536,639
|
$ |
1,207,265
|
$ | (56,763 | ) | $ |
2,008,342
|
|||||||||
FIN
48 Adoption, Net of Tax
|
(5,380 | ) | (5,380 | ) | ||||||||||||||||
Preferred
Stock Dividends
|
(366 | ) | (366 | ) | ||||||||||||||||
TOTAL
|
2,002,596
|
|||||||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||||||
Other
Comprehensive Income, Net of Taxes:
|
||||||||||||||||||||
Cash
Flow Hedges, Net of Tax of $523
|
971
|
971
|
||||||||||||||||||
NET
INCOME
|
153,601
|
153,601
|
||||||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
154,572
|
|||||||||||||||||||
JUNE
30, 2007
|
$ |
321,201
|
$ |
536,639
|
$ |
1,355,120
|
$ | (55,792 | ) | $ |
2,157,168
|
2007
|
2006
|
|||||||
CURRENT
ASSETS
|
||||||||
Cash
and Cash Equivalents
|
$ |
2,999
|
$ |
1,625
|
||||
Accounts
Receivable:
|
||||||||
Customers
|
89,097
|
86,116
|
||||||
Affiliated Companies
|
104,214
|
108,214
|
||||||
Accrued Unbilled Revenues
|
15,956
|
10,106
|
||||||
Miscellaneous
|
4,624
|
1,819
|
||||||
Allowance for Uncollectible Accounts
|
(1,004 | ) | (824 | ) | ||||
Total
Accounts Receivable
|
212,887
|
205,431
|
||||||
Fuel
|
159,637
|
120,441
|
||||||
Materials
and Supplies
|
85,650
|
74,840
|
||||||
Emission
Allowances
|
8,817
|
10,388
|
||||||
Risk
Management Assets
|
57,307
|
86,947
|
||||||
Accrued
Tax Benefits
|
2,747
|
22,909
|
||||||
Prepayments
and Other
|
16,524
|
18,416
|
||||||
TOTAL
|
546,568
|
540,997
|
||||||
PROPERTY,
PLANT AND EQUIPMENT
|
||||||||
Electric:
|
||||||||
Production
|
5,492,398
|
4,413,340
|
||||||
Transmission
|
1,050,149
|
1,030,934
|
||||||
Distribution
|
1,355,421
|
1,322,103
|
||||||
Other
|
306,100
|
299,637
|
||||||
Construction
Work in Progress
|
620,350
|
1,339,631
|
||||||
Total
|
8,824,418
|
8,405,645
|
||||||
Accumulated
Depreciation and Amortization
|
2,871,803
|
2,836,584
|
||||||
TOTAL
- NET
|
5,952,615
|
5,569,061
|
||||||
OTHER
NONCURRENT ASSETS
|
||||||||
Regulatory
Assets
|
366,748
|
414,180
|
||||||
Long-term
Risk Management Assets
|
56,265
|
70,092
|
||||||
Deferred
Charges and Other
|
201,227
|
224,403
|
||||||
TOTAL
|
624,240
|
708,675
|
||||||
TOTAL
ASSETS
|
$ |
7,123,423
|
$ |
6,818,733
|
2007
|
2006
|
|||||||
CURRENT
LIABILITIES
|
(in
thousands)
|
|||||||
Advances
from Affiliates
|
$ |
16,583
|
$ |
181,281
|
||||
Accounts
Payable:
|
||||||||
General
|
167,508
|
250,025
|
||||||
Affiliated Companies
|
110,113
|
145,197
|
||||||
Short-term
Debt – Nonaffiliated
|
-
|
1,203
|
||||||
Long-term
Debt Due Within One Year – Nonaffiliated
|
16,390
|
17,854
|
||||||
Risk
Management Liabilities
|
43,118
|
73,386
|
||||||
Customer
Deposits
|
40,431
|
31,465
|
||||||
Accrued
Taxes
|
187,851
|
165,338
|
||||||
Accrued
Interest
|
44,612
|
35,497
|
||||||
Other
|
108,545
|
123,631
|
||||||
TOTAL
|
735,151
|
1,024,877
|
||||||
NONCURRENT
LIABILITIES
|
||||||||
Long-term
Debt – Nonaffiliated
|
2,641,779
|
2,183,887
|
||||||
Long-term
Debt – Affiliated
|
200,000
|
200,000
|
||||||
Long-term
Risk Management Liabilities
|
39,244
|
52,929
|
||||||
Deferred
Income Taxes
|
893,989
|
911,221
|
||||||
Regulatory
Liabilities and Deferred Investment Tax Credits
|
169,805
|
185,895
|
||||||
Deferred
Credits and Other
|
252,350
|
219,127
|
||||||
TOTAL
|
4,197,167
|
3,753,059
|
||||||
TOTAL
LIABILITIES
|
4,932,318
|
4,777,936
|
||||||
Minority
Interest
|
17,310
|
15,825
|
||||||
Cumulative
Preferred Stock Not Subject to Mandatory Redemption
|
16,627
|
16,630
|
||||||
Commitments
and Contingencies (Note 4)
|
||||||||
COMMON
SHAREHOLDER’S EQUITY
|
||||||||
Common
Stock – No Par Value:
|
||||||||
Authorized
– 40,000,000 Shares
|
||||||||
Outstanding
– 27,952,473 Shares
|
321,201
|
321,201
|
||||||
Paid-in
Capital
|
536,639
|
536,639
|
||||||
Retained
Earnings
|
1,355,120
|
1,207,265
|
||||||
Accumulated
Other Comprehensive Income (Loss)
|
(55,792 | ) | (56,763 | ) | ||||
TOTAL
|
2,157,168
|
2,008,342
|
||||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$ |
7,123,423
|
$ |
6,818,733
|
2007
|
2006
|
|||||||
OPERATING
ACTIVITIES
|
||||||||
Net
Income
|
$ |
153,601
|
$ |
118,431
|
||||
Adjustments
for Noncash Items:
|
||||||||
Depreciation
and Amortization
|
169,055
|
156,676
|
||||||
Deferred
Income Taxes
|
550
|
(8,073 | ) | |||||
Carrying
Costs Income
|
(7,135 | ) | (6,834 | ) | ||||
Mark-to-Market
of Risk Management Contracts
|
1,509
|
1,263
|
||||||
Deferred
Property Taxes
|
34,629
|
35,550
|
||||||
Change
in Other Noncurrent Assets
|
(18,338 | ) |
4,898
|
|||||
Change
in Other Noncurrent Liabilities
|
272
|
16,355
|
||||||
Changes
in Certain Components of Working Capital:
|
||||||||
Accounts
Receivable, Net
|
(18,273 | ) |
97,832
|
|||||
Fuel,
Materials and Supplies
|
(42,452 | ) | (56,075 | ) | ||||
Accounts
Payable
|
(46,758 | ) | (42,878 | ) | ||||
Accrued
Taxes, Net
|
46,587
|
(7,233 | ) | |||||
Other
Current Assets
|
1,545
|
35,848
|
||||||
Other
Current Liabilities
|
4,237
|
(23,816 | ) | |||||
Net
Cash Flows From Operating Activities
|
279,029
|
321,944
|
||||||
INVESTING
ACTIVITIES
|
||||||||
Construction
Expenditures
|
(565,832 | ) | (481,541 | ) | ||||
Change
in Advances to Affiliates, Net
|
-
|
(36,787 | ) | |||||
Proceeds
from Sales of Assets
|
5,594
|
7,511
|
||||||
Other
|
(24 | ) | (1,651 | ) | ||||
Net
Cash Flows Used For Investing Activities
|
(560,262 | ) | (512,468 | ) | ||||
FINANCING
ACTIVITIES
|
||||||||
Capital
Contribution from Parent
|
-
|
70,000
|
||||||
Issuance
of Long-term Debt – Nonaffiliated
|
461,324
|
405,839
|
||||||
Change
in Short-term Debt, Net – Nonaffiliated
|
(1,203 | ) | (5,094 | ) | ||||
Change
in Advances from Affiliates, Net
|
(164,698 | ) | (70,071 | ) | ||||
Retirement
of Long-term Debt – Nonaffiliated
|
(8,927 | ) | (6,177 | ) | ||||
Retirement
of Long-term Debt – Affiliated
|
-
|
(200,000 | ) | |||||
Retirement
of Cumulative Preferred Stock
|
(2 | ) | (8 | ) | ||||
Principal
Payments for Capital Lease Obligations
|
(3,521 | ) | (3,849 | ) | ||||
Dividends
Paid on Cumulative Preferred Stock
|
(366 | ) | (366 | ) | ||||
Net
Cash Flows From Financing Activities
|
282,607
|
190,274
|
||||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
1,374
|
(250 | ) | |||||
Cash
and Cash Equivalents at Beginning of Period
|
1,625
|
1,240
|
||||||
Cash
and Cash Equivalents at End of Period
|
$ |
2,999
|
$ |
990
|
||||
SUPPLEMENTARY
INFORMATION
|
||||||||
Cash
Paid for Interest, Net of Capitalized Amounts
|
$ |
51,991
|
$ |
43,794
|
||||
Net
Cash Paid (Received) for Income Taxes
|
(9,193 | ) |
24,077
|
|||||
Noncash
Acquisitions Under Capital Leases
|
1,036
|
1,662
|
||||||
Construction
Expenditures Included in Accounts Payable at June 30,
|
65,936
|
97,389
|
||||||
See
Condensed Notes to Condensed Financial Statements of Registrant
Subsidiaries.
|
Footnote
Reference
|
|
Significant
Accounting Matters
|
Note
1
|
New
Accounting Pronouncements and Extraordinary Item
|
Note
2
|
Rate
Matters
|
Note
3
|
Commitments,
Guarantees and Contingencies
|
Note
4
|
Benefit
Plans
|
Note
6
|
Business
Segments
|
Note
7
|
Income
Taxes
|
Note
8
|
Financing
Activities
|
Note
9
|
Second
Quarter of 2006
|
$ |
15
|
||||||
Changes
in Gross Margin:
|
||||||||
Retail
and Off-system Sales Margins
|
(2 | ) | ||||||
Transmission
Revenues
|
(1 | ) | ||||||
Other
|
(2 | ) | ||||||
Total
Change in Gross Margin
|
(5 | ) | ||||||
Changes
in Operating Expenses and Other:
|
||||||||
Other
Operation and Maintenance
|
(3 | ) | ||||||
Depreciation
and Amortization
|
(1 | ) | ||||||
Interest
Expense
|
(3 | ) | ||||||
Total
Change in Operating Expenses and Other
|
(7 | ) | ||||||
Income
Tax Expense
|
3
|
|||||||
Second
Quarter of 2007
|
$ |
6
|
·
|
Retail
and Off-system Sales Margins decreased $2 million primarily due
to a
decrease in retail margins resulting from a 28% decrease in cooling
days,
partially offset by an increase in Off-system Sales Margins, 75%
of which
flows through the fuel adjustment clause to retail
customers.
|
·
|
Other
revenues decreased $2 million primarily due to lower gains on sales
of
emission allowances and lower billings to outside parties for construction
services.
|
·
|
Other
Operation and Maintenance expenses increased $3 million primarily
due to
an $8 million increase in generation operation and maintenance
expense
primarily during planned outages at PSO’s Northeastern and Southwestern
plants. This increase was partially offset by a $5 million
decrease in distribution expenses, mostly due to a $7 million adjustment
to capitalize costs related to a January 2007 ice
storm.
|
·
|
Interest
Expense increased $3 million primarily due to increased
borrowings.
|
Six
Months Ended June 30, 2006
|
$ |
9
|
||||||
Changes
in Gross Margin:
|
||||||||
Retail
and Off-system Sales Margins
|
2
|
|||||||
Transmission
Revenues
|
1
|
|||||||
Other
|
(3 | ) | ||||||
Total
Change in Gross Margin
|
-
|
|||||||
Changes
in Operating Expenses and Other:
|
||||||||
Other
Operation and Maintenance
|
(29 | ) | ||||||
Depreciation
and Amortization
|
(3 | ) | ||||||
Interest
Expense
|
(5 | ) | ||||||
Total
Change in Operating Expenses and Other
|
(37 | ) | ||||||
Income
Tax Expense
|
14
|
|||||||
Six
Months Ended June 30, 2007
|
$ | (14 | ) |
·
|
Retail
and Off-system Sales Margins increased $2 million primarily due
to an
increase in margins from Off-System Sales, 75% of which flows through
the
fuel adjustment clause to retail customers, partially offset by
a decrease
in retail margins resulting from a 25% decrease in cooling degree
days.
|
·
|
Other
revenues decreased $3 million primarily due to lower billings to
outside
parties for construction services, as well as the absence of a 2006
settlement received from an electric
cooperative.
|
·
|
Other
Operation and Maintenance expenses increased $29 million primarily
due to
a $15 million increase in distribution maintenance expense primarily
due
to a January 2007 ice storm and a $10 million increase in generation
operation and maintenance expense primarily during planned outages
at
PSO’s Oklaunion, Riverside, Northeastern and Southwestern
plants.
|
·
|
Depreciation
and Amortization increased $3 million due to higher depreciable
asset
balances.
|
·
|
Interest
Expense increased $5 million primarily due to increased
borrowings.
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
REVENUES
|
||||||||||||||||
Electric
Generation, Transmission and Distribution
|
$ |
304,820
|
$ |
333,313
|
$ |
594,900
|
$ |
672,914
|
||||||||
Sales
to AEP Affiliates
|
16,275
|
12,545
|
40,868
|
26,613
|
||||||||||||
Other
|
544
|
1,188
|
1,184
|
2,248
|
||||||||||||
TOTAL
|
321,639
|
347,046
|
636,952
|
701,775
|
||||||||||||
EXPENSES
|
||||||||||||||||
Fuel
and Other Consumables Used for Electric Generation
|
113,633
|
150,976
|
256,148
|
364,149
|
||||||||||||
Purchased
Electricity for Resale
|
70,145
|
56,358
|
137,554
|
89,575
|
||||||||||||
Purchased
Electricity from AEP Affiliates
|
18,979
|
15,880
|
32,463
|
37,111
|
||||||||||||
Other
Operation
|
42,345
|
39,985
|
83,352
|
76,741
|
||||||||||||
Maintenance
|
22,177
|
22,033
|
65,262
|
42,340
|
||||||||||||
Depreciation
and Amortization
|
22,992
|
21,713
|
45,698
|
42,845
|
||||||||||||
Taxes
Other Than Income Taxes
|
9,890
|
10,077
|
20,184
|
20,153
|
||||||||||||
TOTAL
|
300,161
|
317,022
|
640,661
|
672,914
|
||||||||||||
OPERATING
INCOME (LOSS)
|
21,478
|
30,024
|
(3,709 | ) |
28,861
|
|||||||||||
Other
Income
|
562
|
211
|
1,208
|
780
|
||||||||||||
Interest
Expense
|
(12,785 | ) | (9,634 | ) | (24,168 | ) | (18,769 | ) | ||||||||
INCOME
(LOSS) BEFORE INCOME TAXES
|
9,255
|
20,601
|
(26,669 | ) |
10,872
|
|||||||||||
Income
Tax Expense (Credit)
|
2,960
|
5,963
|
(12,538 | ) |
1,591
|
|||||||||||
NET
INCOME (LOSS)
|
6,295
|
14,638
|
(14,131 | ) |
9,281
|
|||||||||||
Preferred
Stock Dividend Requirements
|
53
|
53
|
106
|
106
|
||||||||||||
EARNINGS
(LOSS) APPLICABLE TO COMMON STOCK
|
$ |
6,242
|
$ |
14,585
|
$ | (14,237 | ) | $ |
9,175
|
The
common stock of PSO is owned by a wholly-owned subsidiary of
AEP.
|
See
Condensed Notes to Condensed Financial Statements of Registrant
Subsidiaries.
|
Common
Stock
|
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other Comprehensive Income (Loss)
|
Total
|
||||||||||||||||
DECEMBER
31, 2005
|
$ |
157,230
|
$ |
230,016
|
$ |
162,615
|
$ | (1,264 | ) | $ |
548,597
|
|||||||||
Preferred
Stock Dividends
|
(106 | ) | (106 | ) | ||||||||||||||||
TOTAL
|
548,491
|
|||||||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||||||
Other
Comprehensive Income, Net of
Taxes:
|
||||||||||||||||||||
Cash
Flow Hedges, Net of Tax of $375
|
696
|
696
|
||||||||||||||||||
NET
INCOME
|
9,281
|
9,281
|
||||||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
9,977
|
|||||||||||||||||||
JUNE
30, 2006
|
$ |
157,230
|
$ |
230,016
|
$ |
171,790
|
$ | (568 | ) | $ |
558,468
|
|||||||||
DECEMBER
31, 2006
|
$ |
157,230
|
$ |
230,016
|
$ |
199,262
|
$ | (1,070 | ) | $ |
585,438
|
|||||||||
FIN
48 Adoption, Net of Tax
|
(386 | ) | (386 | ) | ||||||||||||||||
Capital
Contribution from Parent
|
40,000
|
40,000
|
||||||||||||||||||
Preferred
Stock Dividends
|
(106 | ) | (106 | ) | ||||||||||||||||
TOTAL
|
624,946
|
|||||||||||||||||||
COMPREHENSIVE
LOSS
|
||||||||||||||||||||
Other
Comprehensive Income, Net of Taxes:
|
||||||||||||||||||||
Cash
Flow Hedges, Net of Tax of $49
|
91
|
91
|
||||||||||||||||||
NET
LOSS
|
(14,131 | ) | (14,131 | ) | ||||||||||||||||
TOTAL
COMPREHENSIVE LOSS
|
(14,040 | ) | ||||||||||||||||||
JUNE
30, 2007
|
$ |
157,230
|
$ |
270,016
|
$ |
184,639
|
$ | (979 | ) | $ |
610,906
|
2007
|
2006
|
|||||||
CURRENT
ASSETS
|
||||||||
Cash
and Cash Equivalents
|
$ |
908
|
$ |
1,651
|
||||
Accounts
Receivable:
|
||||||||
Customers
|
52,773
|
70,319
|
||||||
Affiliated
Companies
|
68,499
|
73,318
|
||||||
Miscellaneous
|
13,251
|
10,270
|
||||||
Allowance
for Uncollectible Accounts
|
(34 | ) | (5 | ) | ||||
Total
Accounts Receivable
|
134,489
|
153,902
|
||||||
Fuel
|
22,063
|
20,082
|
||||||
Materials
and Supplies
|
54,818
|
48,375
|
||||||
Risk
Management Assets
|
54,372
|
100,802
|
||||||
Accrued
Tax Benefits
|
26,900
|
4,679
|
||||||
Regulatory
Asset for Under-Recovered Fuel Costs
|
21,069
|
7,557
|
||||||
Margin
Deposits
|
18,284
|
35,270
|
||||||
Prepayments
and Other
|
17,849
|
5,732
|
||||||
TOTAL
|
350,752
|
378,050
|
||||||
PROPERTY,
PLANT AND EQUIPMENT
|
||||||||
Electric:
|
||||||||
Production
|
1,109,356
|
1,091,910
|
||||||
Transmission
|
543,722
|
503,638
|
||||||
Distribution
|
1,284,347
|
1,215,236
|
||||||
Other
|
240,542
|
234,227
|
||||||
Construction
Work in Progress
|
151,764
|
141,283
|
||||||
Total
|
3,329,731
|
3,186,294
|
||||||
Accumulated
Depreciation and Amortization
|
1,203,048
|
1,187,107
|
||||||
TOTAL
- NET
|
2,126,683
|
1,999,187
|
||||||
OTHER
NONCURRENT ASSETS
|
||||||||
Regulatory
Assets
|
153,154
|
142,905
|
||||||
Long-term
Risk Management Assets
|
9,200
|
17,066
|
||||||
Employee
Benefits and Pension Assets
|
29,362
|
30,161
|
||||||
Deferred
Charges and Other
|
27,832
|
11,677
|
||||||
TOTAL
|
219,548
|
201,809
|
||||||
TOTAL
ASSETS
|
$ |
2,696,983
|
$ |
2,579,046
|
2007
|
2006
|
|||||||
CURRENT
LIABILITIES
|
(in
thousands)
|
|||||||
Advances
from Affiliates
|
$ |
216,239
|
$ |
76,323
|
||||
Accounts
Payable:
|
||||||||
General
|
168,779
|
165,618
|
||||||
Affiliated
Companies
|
80,116
|
65,134
|
||||||
Long-term
Debt Due Within One Year – Nonaffiliated
|
12,660
|
-
|
||||||
Risk
Management Liabilities
|
42,748
|
88,469
|
||||||
Customer
Deposits
|
42,435
|
51,335
|
||||||
Accrued
Taxes
|
34,327
|
19,984
|
||||||
Other
|
33,671
|
58,651
|
||||||
TOTAL
|
630,975
|
525,514
|
||||||
NONCURRENT
LIABILITIES
|
||||||||
Long-term
Debt – Nonaffiliated
|
670,087
|
669,998
|
||||||
Long-term
Risk Management Liabilities
|
6,481
|
11,448
|
||||||
Deferred
Income Taxes
|
417,789
|
414,197
|
||||||
Regulatory
Liabilities and Deferred Investment Tax Credits
|
295,381
|
315,584
|
||||||
Deferred
Credits and Other
|
60,102
|
51,605
|
||||||
TOTAL
|
1,449,840
|
1,462,832
|
||||||
TOTAL
LIABILITIES
|
2,080,815
|
1,988,346
|
||||||
Cumulative
Preferred Stock Not Subject to Mandatory Redemption
|
5,262
|
5,262
|
||||||
Commitments
and Contingencies (Note 4)
|
||||||||
COMMON
SHAREHOLDER’S EQUITY
|
||||||||
Common
Stock – $15 Par Value Per Share:
|
||||||||
Authorized
– 11,000,000 Shares
|
||||||||
Issued
– 10,482,000 Shares
|
||||||||
Outstanding
– 9,013,000 Shares
|
157,230
|
157,230
|
||||||
Paid-in
Capital
|
270,016
|
230,016
|
||||||
Retained
Earnings
|
184,639
|
199,262
|
||||||
Accumulated
Other Comprehensive Income (Loss)
|
(979 | ) | (1,070 | ) | ||||
TOTAL
|
610,906
|
585,438
|
||||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$ |
2,696,983
|
$ |
2,579,046
|
2007
|
2006
|
|||||||
OPERATING
ACTIVITIES
|
||||||||
Net
Income (Loss)
|
$ | (14,131 | ) | $ |
9,281
|
|||
Adjustments
for Noncash Items:
|
||||||||
Depreciation
and Amortization
|
45,698
|
42,845
|
||||||
Deferred
Income Taxes
|
11,059
|
(22,319 | ) | |||||
Mark-to-Market
of Risk Management Contracts
|
3,608
|
(11,979 | ) | |||||
Deferred
Property Taxes
|
(16,539 | ) | (16,196 | ) | ||||
Change
in Other Noncurrent Assets
|
(26,291 | ) |
9,441
|
|||||
Change
in Other Noncurrent Liabilities
|
(22,811 | ) | (8,232 | ) | ||||
Changes
in Certain Components of Working Capital:
|
||||||||
Accounts
Receivable, Net
|
19,413
|
8,080
|
||||||
Fuel,
Materials and Supplies
|
(8,414 | ) | (6,816 | ) | ||||
Margin
Deposits
|
16,986
|
(46,917 | ) | |||||
Accounts
Payable
|
11,810
|
28,517
|
||||||
Customer
Deposits
|
(8,900 | ) |
1,495
|
|||||
Accrued
Taxes, Net
|
(6,888 | ) |
33,976
|
|||||
Fuel Over/Under Recovery, Net | (13,512 | ) | 75,097 | |||||
Other
Current Assets
|
597
|
1,655
|
||||||
Other
Current Liabilities
|
(22,228 | ) | (19,221 | ) | ||||
Net
Cash Flows From (Used For) Operating Activities
|
(30,543 | ) |
78,707
|
|||||
INVESTING
ACTIVITIES
|
||||||||
Construction
Expenditures
|
(151,973 | ) | (91,617 | ) | ||||
Change
in Other Cash Deposits, Net
|
(12,896 | ) |
6
|
|||||
Other
|
3,109
|
-
|
||||||
Net
Cash Flows Used For Investing Activities
|
(161,760 | ) | (91,611 | ) | ||||
FINANCING
ACTIVITIES
|
||||||||
Capital
Contribution from Parent
|
40,000
|
-
|
||||||
Issuance
of Long-term Debt – Nonaffiliated
|
12,495
|
-
|
||||||
Change
in Advances from Affiliates, Net
|
139,916
|
63,948
|
||||||
Retirement
of Long-term Debt – Affiliated
|
-
|
(50,000 | ) | |||||
Principal
Payments for Capital Lease Obligations
|
(745 | ) | (457 | ) | ||||
Dividends
Paid on Cumulative Preferred Stock
|
(106 | ) | (106 | ) | ||||
Net
Cash Flows From Financing Activities
|
191,560
|
13,385
|
||||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
(743 | ) |
481
|
|||||
Cash
and Cash Equivalents at Beginning of Period
|
1,651
|
1,520
|
||||||
Cash
and Cash Equivalents at End of Period
|
$ |
908
|
$ |
2,001
|
||||
SUPPLEMENTARY
INFORMATION
|
||||||||
Cash
Paid for Interest, Net of Capitalized Amounts
|
$ |
21,339
|
$ |
17,461
|
||||
Net
Cash Paid (Received) for Income Taxes
|
(2,353 | ) |
5,656
|
|||||
Noncash
Acquisitions Under Capital Leases
|
434
|
1,780
|
||||||
Construction
Expenditures Included in Accounts Payable at June 30,
|
21,261
|
5,943
|
Footnote Reference
|
|
Significant
Accounting Matters
|
Note
1
|
New
Accounting Pronouncements and Extraordinary Item
|
Note
2
|
Rate
Matters
|
Note
3
|
Commitments,
Guarantees and Contingencies
|
Note
4
|
Benefit
Plans
|
Note
6
|
Business
Segments
|
Note
7
|
Income
Taxes
|
Note
8
|
Financing
Activities
|
Note
9
|
Second
Quarter of 2006
|
$ |
28
|
||||||
Changes
in Gross Margin:
|
||||||||
Retail
and Off-system Sales Margins (a)
|
(28 | ) | ||||||
Transmission
Revenues
|
(1 | ) | ||||||
Other
|
(3 | ) | ||||||
Total
Change in Gross Margin
|
(32 | ) | ||||||
Changes
in Operating Expenses and Other:
|
||||||||
Other
Operation and Maintenance
|
(4 | ) | ||||||
Depreciation
and Amortization
|
(2 | ) | ||||||
Taxes
Other Than Income Taxes
|
(1 | ) | ||||||
Other
Income
|
2
|
|||||||
Interest
Expense
|
(3 | ) | ||||||
Total
Change in Operating Expenses and Other
|
(8 | ) | ||||||
Income
Tax Expense
|
14
|
|||||||
Second
Quarter of 2007
|
$ |
2
|
(a)
|
Includes
firm wholesale sales to municipals and
cooperatives.
|
·
|
Retail
and Off-system Sales Margins decreased $28 million primarily due
to a $25
million provision related to a SWEPCo Texas fuel reconciliation
proceeding. See “SWEPCo Fuel Reconciliation – Texas” section of
Note 3.
|
·
|
Other
revenues decreased $3 million primarily due to a $4 million decrease
in
revenue from coal deliveries from SWEPCo's mining subsidiary, Dolet
Hills Lignite Company, LLC, to outside parties. The decrease
was offset by a corresponding decrease in Other Operation and Maintenance
expenses from mining operations as discussed
below.
|
·
|
Other
Operation and Maintenance expenses increased $4 million due to
a $7
million increase in generation operation and maintenance expenses
and a $4
million increase in distribution expenses due to higher overhead
line
maintenance, partially offset by a $5 million decrease in expenses
primarily resulting from decreased coal deliveries from SWEPCo's
mining
subsidiary, Dolet Hills Lignite Company, LLC, due to planned and
forced
outages at the Dolet Hills Generating Station, which is jointly-owned
by
SWEPCo and Cleco Corporation, a nonaffiliated entity.
|
·
|
Interest
Expense increased $3 million primarily due to increased
borrowings.
|
Six
Months Ended June 30, 2006
|
$ |
46
|
||||||
Changes
in Gross Margin:
|
||||||||
Retail
and Off-system Sales Margins (a)
|
(29 | ) | ||||||
Transmission
Revenues
|
(1 | ) | ||||||
Other
|
(8 | ) | ||||||
Total
Change in Gross Margin
|
(38 | ) | ||||||
Changes
in Operating Expenses and Other:
|
||||||||
Other
Operation and Maintenance
|
(10 | ) | ||||||
Depreciation
and Amortization
|
(3 | ) | ||||||
Taxes
Other Than Income Taxes
|
(1 | ) | ||||||
Other
Income
|
3
|
|||||||
Interest
Expense
|
(6 | ) | ||||||
Total
Change in Operating Expenses and Other
|
(17 | ) | ||||||
Income
Tax Expense
|
20
|
|||||||
Six
Months Ended June 30, 2007
|
$ |
11
|
(a)
|
Includes
firm wholesale sales to municipals and
cooperatives.
|
·
|
Retail
and Off-system Sales Margins decreased $29 million primarily due
to a $25
million provision related to a SWEPCo Texas fuel reconciliation
proceeding. See “SWEPCo Fuel Reconciliation – Texas” section of
Note 3.
|
·
|
Other
revenues decreased $8 million primarily due to a $6 million decrease
in
revenue from coal deliveries from SWEPCo's mining subsidiary, Dolet
Hills Lignite Company, LLC, to outside parties and a $2 million
decrease
in gains on sales of emission allowances. The decreased revenue
from coal deliveries was offset by a corresponding decrease in
Other
Operation and Maintenance expenses from mining operations as discussed
below.
|
·
|
Other
Operation and Maintenance expenses increased $10 million primarily
due to
an $8 million increase in generation operation and maintenance,
a $5
million increase in distribution expenses due to higher overhead
line
maintenance and a $3 million increase in transmission expenses
related to
higher SPP administration fees, partially offset by a $6 million
decrease
in expenses primarily resulting from decreased coal deliveries
from SWEPCo's mining subsidiary, Dolet Hills Lignite Company, LLC,
due to planned and forced outages at the Dolet Hills Generating
Station,
which is jointly-owned by SWEPCo and Cleco Corporation, a nonaffiliated
entity.
|
·
|
Interest
Expense increased $6 million primarily due to increased
borrowings.
|
Moody’s
|
S&P
|
Fitch
|
|||
First
Mortgage Bonds
|
A3
|
A-
|
A
|
||
Senior
Unsecured Debt
|
Baa1
|
BBB
|
A-
|
2007
|
2006
|
|||||||
(in
thousands)
|
||||||||
Cash
and Cash Equivalents at Beginning of Period
|
$ |
2,618
|
$ |
3,049
|
||||
Cash
Flows From (Used For):
|
||||||||
Operating
Activities
|
120,597
|
76,154
|
||||||
Investing
Activities
|
(253,267 | ) | (123,275 | ) | ||||
Financing
Activities
|
131,610
|
46,180
|
||||||
Net
Decrease in Cash and Cash Equivalents
|
(1,060 | ) | (941 | ) | ||||
Cash
and Cash Equivalents at End of Period
|
$ |
1,558
|
$ |
2,108
|
Principal
Amount
|
Interest
|
Due
|
|||||
Type
of Debt
|
Rate
|
Date
|
|||||
(in
thousands)
|
(%)
|
||||||
Senior
Unsecured Notes
|
$
|
250,000
|
5.55
|
2017
|
Principal
Amount
|
Interest
|
Due
|
|||||
Type
of Debt
|
Rate
|
Date
|
|||||
(in
thousands)
|
(%)
|
||||||
Notes
Payable – Nonaffiliated
|
$
|
3,109
|
4.47
|
2011
|
|||
Notes
Payable – Nonaffiliated
|
4,000
|
6.36
|
2007
|
||||
Notes
Payable – Nonaffiliated
|
1,500
|
Variable
|
2008
|
MTM
Risk Management Contracts
|
Cash
Flow Hedges
|
Total
|
||||||||||
Current
Assets
|
$ |
64,354
|
$ |
8
|
$ |
64,362
|
||||||
Noncurrent
Assets
|
10,929
|
50
|
10,979
|
|||||||||
Total
MTM Derivative Contract Assets
|
75,283
|
58
|
75,341
|
|||||||||
Current
Liabilities
|
(51,054 | ) | (12 | ) | (51,066 | ) | ||||||
Noncurrent
Liabilities
|
(7,822 | ) |
-
|
(7,822 | ) | |||||||
Total
MTM Derivative Contract Liabilities
|
(58,876 | ) | (12 | ) | (58,888 | ) | ||||||
Total
MTM Derivative Contract Net Assets (Liabilities)
|
$ |
16,407
|
$ |
46
|
$ |
16,453
|
Total
MTM Risk Management Contract Net Assets at December 31,
2006
|
$
|
20,166
|
||
(Gain)
Loss from Contracts Realized/Settled During the Period and Entered
in a
Prior Period
|
(2,885
|
)
|
||
Fair
Value of New Contracts at Inception When Entered During the Period
(a)
|
-
|
|||
Net
Option Premiums Paid/(Received) for Unexercised or Unexpired Option
Contracts Entered During the Period
|
-
|
|||
Change
in Fair Value Due to Valuation Methodology Changes on Forward
Contracts
|
-
|
|||
Changes
in Fair Value Due to Market Fluctuations During the Period
(b)
|
1,853
|
|||
Changes
in Fair Value Allocated to Regulated Jurisdictions (c)
|
(2,727
|
)
|
||
Total
MTM Risk Management Contract Net Assets
|
16,407
|
|||
Net
Cash Flow Hedge Contracts
|
46
|
|||
Total
MTM Risk Management Contract Net Assets at June 30,
2007
|
$
|
16,453
|
(a)
|
Reflects
fair value on long-term contracts which are typically with customers
that
seek fixed pricing to limit their risk against fluctuating energy
prices. Inception value is only recorded if observable market
data can be obtained for valuation inputs for the entire contract
term. The contract prices are valued against market curves
associated with the delivery location and delivery
term.
|
(b)
|
Market
fluctuations are attributable to various factors such as supply/demand,
weather, etc.
|
(c)
|
“Changes
in Fair Value Allocated to Regulated Jurisdictions” relates to the net
gains (losses) of those contracts that are not reflected in the
Condensed
Consolidated Statements of Income. These net gains (losses) are
recorded as regulatory liabilities/assets for those subsidiaries
that
operate in regulated jurisdictions.
|
·
|
The
method of measuring fair value used in determining the carrying
amount of
total MTM asset or liability (external sources or modeled
internally).
|
·
|
The
maturity, by year, of net assets/liabilities to give an indication
of when
these MTM amounts will settle and generate
cash.
|
Remainder
2007
|
2008
|
2009
|
2010
|
2011
|
After
2011
|
Total
|
||||||||||||||||||||||
Prices
Actively Quoted – Exchange Traded
Contracts
|
$ | (10,100 | ) | $ |
1,544
|
$ | (247 | ) | $ |
-
|
$ |
-
|
$ |
-
|
$ | (8,803 | ) | |||||||||||
Prices
Provided by Other External Sources
-
OTC Broker Quotes
(a)
|
21,341
|
4,080
|
(711 | ) |
-
|
-
|
-
|
24,710
|
||||||||||||||||||||
Prices
Based on Models and Other Valuation
Methods (b)
|
(1,494 | ) |
521
|
1,471
|
2
|
-
|
-
|
500
|
||||||||||||||||||||
Total
|
$ |
9,747
|
$ |
6,145
|
$ |
513
|
$ |
2
|
$ |
-
|
$ |
-
|
$ |
16,407
|
(a)
|
“Prices
Provided by Other External Sources – OTC Broker Quotes” reflects
information obtained from over-the-counter brokers, industry services,
or
multiple-party on-line platforms.
|
(b)
|
“Prices
Based on Models and Other Valuation Methods” is used in absence of
independent information from external sources. Modeled
information is derived using valuation models developed by the
reporting
entity, reflecting when appropriate, option pricing theory, discounted
cash flow concepts, valuation adjustments, etc. and may require
projection
of prices for underlying commodities beyond the period that prices
are
available from third-party sources. In addition, where external
pricing information or market liquidity are limited, such valuations
are
classified as modeled. The determination of the point at which
a market is no longer liquid for placing it in the modeled category
varies
by market. Contract values that are measured using models or
valuation methods other than active quotes or OTC broker quotes
(because
of the lack of such data for all delivery quantities, locations
and
periods) incorporate in the model or other valuation methods, to
the
extent possible, OTC broker quotes and active quotes for deliveries
in
years and at locations for which such quotes are available including
values determinable by other third party
transactions.
|
Interest
Rate
|
Foreign
Currency
|
Total
|
||||||||||
Beginning
Balance in AOCI December 31, 2006
|
$ | (6,435 | ) | $ |
25
|
$ | (6,410 | ) | ||||
Changes
in Fair Value
|
(1,019 | ) |
549
|
(470 | ) | |||||||
Reclassifications
from AOCI to Net Income for
Cash Flow Hedges Settled
|
391
|
-
|
391
|
|||||||||
Ending
Balance in AOCI June 30, 2007
|
$ | (7,063 | ) | $ |
574
|
$ | (6,489 | ) |
Six
Months Ended June 30, 2007
|
Twelve
Months Ended December 31, 2006
|
||||||||||||||||
(in
thousands)
|
(in
thousands)
|
||||||||||||||||
End
|
High
|
Average
|
Low
|
End
|
High
|
Average
|
Low
|
||||||||||
$118
|
$245
|
$97
|
$25
|
$447
|
$2,171
|
$794
|
$68
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
REVENUES
|
||||||||||||||||
Electric
Generation, Transmission and Distribution
|
$ |
329,250
|
$ |
349,650
|
$ |
656,534
|
$ |
643,643
|
||||||||
Sales
to AEP Affiliates
|
16,237
|
9,414
|
32,652
|
20,179
|
||||||||||||
Other
|
535
|
420
|
935
|
794
|
||||||||||||
TOTAL
|
346,022
|
359,484
|
690,121
|
664,616
|
||||||||||||
EXPENSES
|
||||||||||||||||
Fuel
and Other Consumables Used for Electric Generation
|
125,994
|
118,271
|
237,981
|
208,932
|
||||||||||||
Purchased
Electricity for Resale
|
56,870
|
44,884
|
109,368
|
74,102
|
||||||||||||
Purchased
Electricity from AEP Affiliates
|
16,085
|
16,826
|
39,002
|
40,163
|
||||||||||||
Other
Operation
|
50,204
|
53,216
|
103,987
|
102,916
|
||||||||||||
Maintenance
|
29,721
|
22,231
|
56,060
|
46,888
|
||||||||||||
Depreciation
and Amortization
|
34,668
|
32,959
|
68,790
|
65,576
|
||||||||||||
Taxes
Other Than Income Taxes
|
17,540
|
16,165
|
33,531
|
32,147
|
||||||||||||
TOTAL
|
331,082
|
304,552
|
648,719
|
570,724
|
||||||||||||
OPERATING
INCOME
|
14,940
|
54,932
|
41,402
|
93,892
|
||||||||||||
Other
Income
|
3,338
|
840
|
5,434
|
1,568
|
||||||||||||
Interest
Expense
|
(17,235 | ) | (14,073 | ) | (32,725 | ) | (26,844 | ) | ||||||||
INCOME
BEFORE INCOME TAXES AND
MINORITY
INTEREST EXPENSE
|
1,043
|
41,699
|
14,111
|
68,616
|
||||||||||||
Income
Tax Expense (Credit)
|
(1,553 | ) |
12,491
|
1,068
|
21,314
|
|||||||||||
Minority
Interest Expense
|
972
|
896
|
1,814
|
1,118
|
||||||||||||
NET
INCOME
|
1,624
|
28,312
|
11,229
|
46,184
|
||||||||||||
Preferred
Stock Dividend Requirements
|
57
|
58
|
114
|
115
|
||||||||||||
EARNINGS
APPLICABLE TO COMMON STOCK
|
$ |
1,567
|
$ |
28,254
|
$ |
11,115
|
$ |
46,069
|
The
common stock of SWEPCo is owned by a wholly-owned subsidiary of
AEP.
|
See
Condensed Notes to Condensed Financial Statements of Registrant
Subsidiaries.
|
Common
Stock
|
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other Comprehensive Income (Loss)
|
Total
|
||||||||||||||||
DECEMBER
31, 2005
|
$ |
135,660
|
$ |
245,003
|
$ |
407,844
|
$ | (6,129 | ) | $ |
782,378
|
|||||||||
Common
Stock Dividends
|
(20,000 | ) | (20,000 | ) | ||||||||||||||||
Preferred
Stock Dividends
|
(115 | ) | (115 | ) | ||||||||||||||||
TOTAL
|
762,263
|
|||||||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||||||
Other
Comprehensive Income, Net of
Taxes:
|
||||||||||||||||||||
Cash
Flow Hedges, Net of Tax of $519
|
964
|
964
|
||||||||||||||||||
NET
INCOME
|
46,184
|
46,184
|
||||||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
47,148
|
|||||||||||||||||||
JUNE
30, 2006
|
$ |
135,660
|
$ |
245,003
|
$ |
433,913
|
$ | (5,165 | ) | $ |
809,411
|
|||||||||
DECEMBER
31, 2006
|
$ |
135,660
|
$ |
245,003
|
$ |
459,338
|
$ | (18,799 | ) | $ |
821,202
|
|||||||||
FIN
48 Adoption, Net of Tax
|
(1,642 | ) | (1,642 | ) | ||||||||||||||||
Capital
Contribution from Parent Company
|
25,000
|
25,000
|
||||||||||||||||||
Preferred
Stock Dividends
|
(114 | ) | (114 | ) | ||||||||||||||||
TOTAL
|
844,446
|
|||||||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||||||
Other
Comprehensive Loss, Net of Taxes:
|
||||||||||||||||||||
Cash
Flow Hedges, Net of Tax of $172
|
(79 | ) | (79 | ) | ||||||||||||||||
NET
INCOME
|
11,229
|
11,229
|
||||||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
11,150
|
|||||||||||||||||||
JUNE
30, 2007
|
$ |
135,660
|
$ |
270,003
|
$ |
468,811
|
$ | (18,878 | ) | $ |
855,596
|
2007
|
2006
|
|||||||
CURRENT
ASSETS
|
||||||||
Cash
and Cash Equivalents
|
$ |
1,558
|
$ |
2,618
|
||||
Accounts
Receivable:
|
||||||||
Customers
|
66,047
|
88,245
|
||||||
Affiliated
Companies
|
54,004
|
59,679
|
||||||
Miscellaneous
|
9,473
|
8,595
|
||||||
Allowance
for Uncollectible Accounts
|
(32 | ) | (130 | ) | ||||
Total
Accounts Receivable
|
129,492
|
156,389
|
||||||
Fuel
|
77,717
|
69,426
|
||||||
Materials
and Supplies
|
48,847
|
46,001
|
||||||
Risk
Management Assets
|
64,362
|
120,036
|
||||||
Margin
Deposits
|
21,940
|
41,579
|
||||||
Prepayments
and Other
|
22,284
|
18,256
|
||||||
TOTAL
|
366,200
|
454,305
|
||||||
PROPERTY,
PLANT AND EQUIPMENT
|
||||||||
Electric:
|
||||||||
Production
|
1,596,040
|
1,576,200
|
||||||
Transmission
|
710,732
|
668,008
|
||||||
Distribution
|
1,279,426
|
1,228,948
|
||||||
Other
|
615,126
|
595,429
|
||||||
Construction
Work in Progress
|
392,402
|
259,662
|
||||||
Total
|
4,593,726
|
4,328,247
|
||||||
Accumulated
Depreciation and Amortization
|
1,884,582
|
1,834,145
|
||||||
TOTAL
- NET
|
2,709,144
|
2,494,102
|
||||||
OTHER
NONCURRENT ASSETS
|
||||||||
Regulatory
Assets
|
138,155
|
156,420
|
||||||
Long-term
Risk Management Assets
|
10,979
|
20,531
|
||||||
Employee
Benefits and Pension Assets
|
24,576
|
26,029
|
||||||
Deferred
Charges and Other
|
62,266
|
39,581
|
||||||
TOTAL
|
235,976
|
242,561
|
||||||
TOTAL
ASSETS
|
$ |
3,311,320
|
$ |
3,190,968
|
2007
|
2006
|
|||||||
CURRENT
LIABILITIES
|
(in
thousands)
|
|||||||
Advances
from Affiliates
|
$ |
53,955
|
$ |
188,965
|
||||
Accounts
Payable:
|
||||||||
General
|
157,564
|
140,424
|
||||||
Affiliated
Companies
|
70,842
|
68,680
|
||||||
Short-term
Debt – Nonaffiliated
|
22,373
|
17,143
|
||||||
Long-term
Debt Due Within One Year – Nonaffiliated
|
97,406
|
102,312
|
||||||
Risk
Management Liabilities
|
51,066
|
109,578
|
||||||
Customer
Deposits
|
38,233
|
48,277
|
||||||
Accrued
Taxes
|
67,335
|
31,591
|
||||||
Regulatory
Liability for Over-Recovered Fuel Costs
|
51,805
|
26,012
|
||||||
Other
|
75,835
|
85,086
|
||||||
TOTAL
|
686,414
|
818,068
|
||||||
NONCURRENT
LIABILITIES
|
||||||||
Long-term
Debt – Nonaffiliated
|
819,450
|
576,694
|
||||||
Long-term
Debt – Affiliated
|
50,000
|
50,000
|
||||||
Long-term
Risk Management Liabilities
|
7,822
|
14,083
|
||||||
Deferred
Income Taxes
|
348,760
|
374,548
|
||||||
Regulatory
Liabilities and Deferred Investment Tax Credits
|
339,243
|
346,774
|
||||||
Deferred
Credits and Other
|
197,615
|
183,087
|
||||||
TOTAL
|
1,762,890
|
1,545,186
|
||||||
TOTAL
LIABILITIES
|
2,449,304
|
2,363,254
|
||||||
Minority
Interest
|
1,723
|
1,815
|
||||||
Cumulative
Preferred Stock Not Subject to Mandatory Redemption
|
4,697
|
4,697
|
||||||
Commitments
and Contingencies (Note 4)
|
||||||||
COMMON
SHAREHOLDER’S EQUITY
|
||||||||
Common
Stock – Par Value – $18 Per Share:
|
||||||||
Authorized
– 7,600,000 Shares
|
||||||||
Outstanding
– 7,536,640 Shares
|
135,660
|
135,660
|
||||||
Paid-in
Capital
|
270,003
|
245,003
|
||||||
Retained
Earnings
|
468,811
|
459,338
|
||||||
Accumulated
Other Comprehensive Income (Loss)
|
(18,878 | ) | (18,799 | ) | ||||
TOTAL
|
855,596
|
821,202
|
||||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$ |
3,311,320
|
$ |
3,190,968
|
2007
|
2006
|
|||||||
OPERATING
ACTIVITIES
|
||||||||
Net
Income
|
$ |
11,229
|
$ |
46,184
|
||||
Adjustments
for Noncash Items:
|
||||||||
Depreciation
and Amortization
|
68,790
|
65,576
|
||||||
Deferred
Income Taxes
|
(21,658 | ) | (15,511 | ) | ||||
Provision
for Fuel Disallowance
|
24,500
|
-
|
||||||
Mark-to-Market
of Risk Management Contracts
|
3,759
|
(14,213 | ) | |||||
Deferred
Property Taxes
|
(19,210 | ) | (18,593 | ) | ||||
Change
in Other Noncurrent Assets
|
(107 | ) |
16,538
|
|||||
Change
in Other Noncurrent Liabilities
|
(7,932 | ) | (16,419 | ) | ||||
Changes
in Certain Components of Working Capital:
|
||||||||
Accounts
Receivable, Net
|
26,897
|
(15,662 | ) | |||||
Fuel,
Materials and Supplies
|
(11,126 | ) | (23,003 | ) | ||||
Margin
Deposits
|
19,639
|
(52,838 | ) | |||||
Accounts
Payable
|
8,388
|
60,158
|
||||||
Customer
Deposits
|
(10,044 | ) |
3,763
|
|||||
Accrued
Taxes, Net
|
36,445
|
19,153
|
||||||
Fuel Over/Under Recovery, Net | 1,293 | 37,377 | ||||||
Other
Current Assets
|
1,266
|
3,560
|
||||||
Other
Current Liabilities
|
(11,532 | ) | (19,916 | ) | ||||
Net
Cash Flows From Operating Activities
|
120,597
|
76,154
|
||||||
INVESTING
ACTIVITIES
|
||||||||
Construction
Expenditures
|
(250,409 | ) | (122,616 | ) | ||||
Other
|
(2,858 | ) | (659 | ) | ||||
Net
Cash Flows Used For Investing Activities
|
(253,267 | ) | (123,275 | ) | ||||
FINANCING
ACTIVITIES
|
||||||||
Capital
Contribution from Parent
|
25,000
|
-
|
||||||
Issuance
of Long-term Debt – Nonaffiliated
|
247,496
|
80,593
|
||||||
Change
in Short-term Debt, Net – Nonaffiliated
|
5,230
|
8,855
|
||||||
Change
in Advances from Affiliates, Net
|
(135,010 | ) |
64,873
|
|||||
Retirement
of Long-term Debt – Nonaffiliated
|
(8,609 | ) | (86,594 | ) | ||||
Principal
Payments for Capital Lease Obligations
|
(2,383 | ) | (1,432 | ) | ||||
Dividends
Paid on Common Stock
|
-
|
(20,000 | ) | |||||
Dividends
Paid on Cumulative Preferred Stock
|
(114 | ) | (115 | ) | ||||
Net
Cash Flows From Financing Activities
|
131,610
|
46,180
|
||||||
Net
Decrease in Cash and Cash Equivalents
|
(1,060 | ) | (941 | ) | ||||
Cash
and Cash Equivalents at Beginning of Period
|
2,618
|
3,049
|
||||||
Cash
and Cash Equivalents at End of Period
|
$ |
1,558
|
$ |
2,108
|
||||
SUPPLEMENTARY
INFORMATION
|
||||||||
Cash
Paid for Interest, Net of Capitalized Amounts
|
$ |
25,876
|
$ |
24,840
|
||||
Net
Cash Paid for Income Taxes
|
10,617
|
42,788
|
||||||
Noncash
Acquisitions Under Capital Leases
|
6,511
|
5,537
|
||||||
Construction
Expenditures Included in Accounts Payable at June 30,
|
38,630
|
8,326
|
Footnote
Reference
|
|
Significant
Accounting Matters
|
Note
1
|
New
Accounting Pronouncements and Extraordinary Item
|
Note
2
|
Rate
Matters
|
Note
3
|
Commitments,
Guarantees and Contingencies
|
Note
4
|
Benefit
Plans
|
Note
6
|
Business
Segments
|
Note
7
|
Income
Taxes
|
Note
8
|
Financing
Activities
|
Note
9
|
The
condensed notes to condensed financial statements that
follow are a combined presentation for the Registrant
Subsidiaries. The following list indicates the registrants to
which the footnotes apply:
|
||
1.
|
Significant Accounting Matters
|
APCo,
CSPCo, I&M, OPCo, PSO, SWEPCo
|
2.
|
New Accounting Pronouncements and Extraordinary
Item
|
APCo,
CSPCo, I&M, OPCo, PSO, SWEPCo
|
3.
|
Rate Matters
|
APCo,
CSPCo, I&M, OPCo, PSO, SWEPCo
|
4.
|
Commitments, Guarantees and Contingencies
|
APCo,
CSPCo, I&M, OPCo, PSO, SWEPCo
|
5.
|
Acquisition
|
CSPCo
|
6.
|
Benefit Plans
|
APCo,
CSPCo, I&M, OPCo, PSO, SWEPCo
|
7.
|
Business Segments
|
APCo,
CSPCo, I&M, OPCo, PSO, SWEPCo
|
8.
|
Income Taxes
|
APCo,
CSPCo, I&M, OPCo, PSO, SWEPCo
|
9.
|
Financing Activities
|
APCo,
CSPCo, I&M, OPCo, PSO,
SWEPCo
|
1.
|
SIGNIFICANT ACCOUNTING
MATTERS
|
June
30,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
Components
|
(in
thousands)
|
|||||||
Cash
Flow Hedges:
|
||||||||
APCo
|
$ |
2,063
|
$ | (2,547 | ) | |||
CSPCo
|
4,067
|
3,398
|
||||||
I&M
|
(7,756 | ) | (8,962 | ) | ||||
OPCo
|
8,233
|
7,262
|
||||||
PSO
|
(979 | ) | (1,070 | ) | ||||
SWEPCo
|
(6,489 | ) | (6,410 | ) | ||||
SFAS
158 Costs:
|
||||||||
APCo
|
$ | (40,999 | ) | $ | (52,244 | ) | ||
CSPCo
|
(25,386 | ) | (25,386 | ) | ||||
I&M
|
(6,089 | ) | (6,089 | ) | ||||
OPCo
|
(64,025 | ) | (64,025 | ) | ||||
SWEPCo
|
(12,389 | ) | (12,389 | ) |
For
the Three Months Ended June 30, 2007
|
||||||||||||
Net
Settlement
With
AEPEP
|
Third
Party Amounts
Reclassified
to Affiliate
|
Net
Amount included in Sales to AEP Affiliates
|
||||||||||
Company
|
(in
thousands)
|
|||||||||||
PSO
|
$ |
33,293
|
$ | (30,307 | ) | $ |
2,986
|
|||||
SWEPCo
|
46,678
|
(43,160 | ) |
3,518
|
For
the Six Months Ended June 30,
2007
|
||||||||||||
Net
Settlement
With
AEPEP
|
Third
Party Amounts
Reclassified
to Affiliate
|
Net
Amount included in Sales to AEP
Affiliates
|
||||||||||
Company
|
(in
thousands)
|
|||||||||||
PSO
|
$ |
76,443
|
$ | (66,144 | ) | $ |
10,299
|
|||||
SWEPCo
|
93,554
|
(81,419 | ) |
12,135
|
As
of June 30, 2007
|
||||||||
PSO
|
SWEPCo
|
|||||||
Current
|
(in
thousands)
|
|||||||
Risk
Management Assets
|
$ |
12,513
|
$ |
14,743
|
||||
Risk
Management Liabilities
|
(1,894 | ) | (2,231 | ) | ||||
Noncurrent
|
||||||||
Long-term
Risk Management Assets
|
$ |
943
|
$ |
1,111
|
||||
Long-term
Risk Management Liabilities
|
(2,946 | ) | (3,471 | ) |
Three
Months Ended
|
Six
Months Ended
|
|||||||||
June
30, 2006
|
June
30, 2006
|
|||||||||
Company
|
(in
thousands)
|
|||||||||
APCo
|
$ |
302
|
$ |
598
|
||||||
I&M
|
6,118
|
11,707
|
2.
|
NEW
ACCOUNTING PRONOUNCEMENTS AND EXTRAORDINARY
ITEM
|
Company
|
(in
thousands)
|
|||
APCo
|
$
|
2,685
|
||
CSPCo
|
3,022
|
|||
I&M
|
(327
|
)
|
||
OPCo
|
5,380
|
|||
PSO
|
386
|
|||
SWEPCo
|
1,642
|
3.
|
RATE
MATTERS
|
·
|
AEP/AP proposed a Highway/Byway rate design
in
which:
|
|
·
|
The cost of all transmission facilities in
the PJM
region operated at 345 kV or higher would be included in a “Highway” rate
that all load serving entities (LSEs) would pay based on peak
demand. The AEP/AP proposal would produce about $125 million in
net revenues per year for AEP from users in other zones of
PJM.
|
|
·
|
The cost of transmission facilities operating
at lower
voltages would be collected in the zones where those costs are
presently
charged under PJM’s existing rate design.
|
|
·
|
Two other utilities, Baltimore Gas & Electric
Company (BG&E) and Old Dominion Electric Cooperative (ODEC), proposed
a Highway/Byway rate that includes transmission facilities above
200 kV in
the Highway rate, which would have produced lower net revenues
for AEP
than the AEP/AP proposal.
|
|
·
|
In another competing Highway/Byway proposal,
a group of
LSEs proposed rates that would include existing 500 kV and higher
voltage
facilities and new facilities above 200 kV in the Highway rate,
which
would also have produced lower net revenues for AEP than the AEP/AP
proposal.
|
|
·
|
In January 2006, the FERC staff issued testimony
and
exhibits supporting phase-in of a PJM-wide flat rate or “Postage Stamp”
type of rate design that would socialize the cost of all transmission
facilities. The proposed rate design would have initially
produced much lower net transmission revenues for AEP than the
AEP/AP
proposal, but could produce slightly higher net revenues when fully
phased
in.
|
Company
|
(in
millions)
|
|||
APCo
|
$
|
70.2
|
||
CSPCo
|
38.8
|
|||
I&M
|
41.3
|
|||
OPCo
|
53.3
|
Company
|
(in
millions)
|
|||
APCo
|
$
|
12.0
|
||
CSPCo
|
6.7
|
|||
I&M
|
7.0
|
|||
OPCo
|
9.1
|
4.
|
COMMITMENTS, GUARANTEES AND
CONTINGENCIES
|
Maximum
Potential Loss
|
||||
Company
|
(in
millions)
|
|||
APCo
|
$ |
8
|
||
CSPCo
|
4
|
|||
I&M
|
6
|
|||
OPCo
|
8
|
|||
PSO
|
5
|
|||
SWEPCo
|
6
|
5.
|
ACQUISITION
|
6.
|
BENEFIT
PLANS
|
Other
|
||||||||||||||||
Postretirement
|
||||||||||||||||
Pension
Plans
|
Benefit
Plans
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Three
Months Ended June 30, 2007 and 2006
|
(in
millions)
|
|||||||||||||||
Service
Cost
|
$ |
23
|
$ |
24
|
$ |
11
|
$ |
10
|
||||||||
Interest
Cost
|
57
|
57
|
26
|
25
|
||||||||||||
Expected
Return on Plan Assets
|
(82 | ) | (83 | ) | (26 | ) | (23 | ) | ||||||||
Amortization
of Transition Obligation
|
-
|
-
|
7
|
7
|
||||||||||||
Amortization
of Net Actuarial Loss
|
14
|
19
|
3
|
5
|
||||||||||||
Net
Periodic Benefit Cost
|
$ |
12
|
$ |
17
|
$ |
21
|
$ |
24
|
Other
|
||||||||||||||||
Postretirement
|
||||||||||||||||
Pension
Plans
|
Benefit
Plans
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Six
Months Ended June 30, 2007 and 2006
|
(in
millions)
|
|||||||||||||||
Service
Cost
|
$ |
47
|
$ |
48
|
$ |
21
|
$ |
20
|
||||||||
Interest
Cost
|
116
|
114
|
52
|
50
|
||||||||||||
Expected
Return on Plan Assets
|
(167 | ) | (166 | ) | (52 | ) | (46 | ) | ||||||||
Amortization
of Transition Obligation
|
-
|
-
|
14
|
14
|
||||||||||||
Amortization
of Net Actuarial Loss
|
29
|
39
|
6
|
10
|
||||||||||||
Net
Periodic Benefit Cost
|
$ |
25
|
$ |
35
|
$ |
41
|
$ |
48
|
Pension
Plans
|
Other
Postretirement
Benefit
Plans
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Three
Months Ended June 30, 2007 and 2006
|
(in
thousands)
|
|||||||||||||||
APCo
|
$ |
842
|
$ |
1,469
|
$ |
3,560
|
$ |
4,489
|
||||||||
CSPCo
|
(258 | ) |
205
|
1,491
|
1,805
|
|||||||||||
I&M
|
1,900
|
2,330
|
2,531
|
2,953
|
||||||||||||
OPCo
|
245
|
829
|
2,801
|
3,396
|
||||||||||||
PSO
|
424
|
979
|
1,430
|
1,588
|
||||||||||||
SWEPCo
|
747
|
1,225
|
1,419
|
1,578
|
Pension
Plans
|
Other
Postretirement
Benefit
Plans
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Six
Months Ended June 30, 2007 and 2006
|
(in
thousands)
|
|||||||||||||||
APCo
|
$ |
1,684
|
$ |
2,937
|
$ |
7,120
|
$ |
8,978
|
||||||||
CSPCo
|
(515 | ) |
410
|
2,982
|
3,610
|
|||||||||||
I&M
|
3,800
|
4,661
|
5,061
|
5,906
|
||||||||||||
OPCo
|
490
|
1,655
|
5,603
|
6,792
|
||||||||||||
PSO
|
848
|
1,956
|
2,861
|
3,176
|
||||||||||||
SWEPCo
|
1,493
|
2,450
|
2,838
|
3,156
|
7.
|
BUSINESS
SEGMENTS
|
8.
|
INCOME
TAXES
|
Company
|
(in
thousands)
|
|||
APCo
|
$
|
2,685
|
||
CSPCo
|
3,022
|
|||
I&M
|
(327
|
)
|
||
OPCo
|
5,380
|
|||
PSO
|
386
|
|||
SWEPCo
|
1,642
|
Company
|
(in
millions)
|
|||
APCo
|
$
|
21.7
|
||
CSPCo
|
25.0
|
|||
I&M
|
18.2
|
|||
OPCo
|
49.8
|
|||
PSO
|
8.9
|
|||
SWEPCo
|
7.1
|
Company
|
(in
millions)
|
|||
APCo
|
$
|
5.5
|
||
CSPCo
|
9.3
|
|||
I&M
|
6.0
|
|||
OPCo
|
9.0
|
|||
PSO
|
4.4
|
|||
SWEPCo
|
2.8
|
Company
|
(in
millions)
|
|||
APCo
|
$
|
5.4
|
||
CSPCo
|
13.8
|
|||
I&M
|
5.4
|
|||
OPCo
|
23.4
|
|||
PSO
|
1.2
|
|||
SWEPCo
|
1.2
|
Company
|
(in
millions)
|
|||
APCo
|
$
|
13.7
|
||
CSPCo
|
3.9
|
|||
I&M
|
10.3
|
|||
OPCo
|
14.2
|
|||
PSO
|
7.1
|
|||
SWEPCo
|
5.1
|
Company
|
(in
millions)
|
|||
APCo
|
$
|
4.6
|
||
CSPCo
|
1.7
|
|||
I&M
|
2.8
|
|||
OPCo
|
4.3
|
|||
PSO
|
2.7
|
|||
SWEPCo
|
2.0
|
9.
|
FINANCING
ACTIVITIES
|
Company
|
Type
of Debt
|
Principal
Amount
|
Interest
Rate
|
Due
Date
|
|||||
(in
thousands)
|
(%)
|
||||||||
Issuances:
|
|||||||||
APCo
|
Pollution
Control Bonds
|
$
|
75,000
|
Variable
|
2037
|
||||
OPCo
|
Pollution
Control Bonds
|
65,000
|
4.90
|
2037
|
|||||
OPCo
|
Senior
Unsecured Notes
|
400,000
|
Variable
|
2010
|
|||||
PSO
|
Pollution
Control Bonds
|
12,660
|
4.45
|
2020
|
|||||
SWEPCo
|
Senior
Unsecured Notes
|
250,000
|
5.55
|
2017
|
Company
|
Type
of Debt
|
Principal
Amount
|
Interest
Rate
|
Due
Date
|
|||||
(in
thousands)
|
(%)
|
||||||||
Retirements
and
Principal
Payments:
|
|||||||||
APCo
|
Senior
Unsecured Notes
|
$
|
125,000
|
Variable
|
2007
|
||||
APCo
|
Other
|
6
|
13.718
|
2026
|
|||||
OPCo
|
Notes
Payable
|
2,927
|
6.81
|
2008
|
|||||
OPCo
|
Notes
Payable
|
6,000
|
6.27
|
2009
|
|||||
SWEPCo
|
Notes
Payable
|
3,109
|
4.47
|
2011
|
|||||
SWEPCo
|
Notes
Payable
|
4,000
|
6.36
|
2007
|
|||||
SWEPCo
|
Notes
Payable
|
1,500
|
Variable
|
2008
|
Maximum
Borrowings
from
Utility
Money
Pool
|
Maximum
Loans
to
Utility
Money
Pool
|
Average
Borrowings
from
Utility
Money
Pool
|
Average
Loans
to
Utility
Money
Pool
|
Borrowings
from
Utility Money Pool as of
June
30, 2007
|
Authorized
Short-Term
Borrowing
Limit
|
|||||||||||||||||||
Company
|
(in
thousands)
|
|||||||||||||||||||||||
APCo
|
$ |
247,616
|
$ |
-
|
$ |
103,925
|
$ |
-
|
$ |
247,616
|
$ |
600,000
|
||||||||||||
CSPCo
|
117,890
|
35,270
|
53,692
|
13,190
|
64,003
|
350,000
|
||||||||||||||||||
I&M
|
100,374
|
-
|
60,659
|
-
|
14,941
|
500,000
|
||||||||||||||||||
OPCo
|
447,335
|
1,564
|
209,965
|
1,564
|
16,583
|
600,000
|
||||||||||||||||||
PSO
|
216,239
|
-
|
111,567
|
-
|
216,239
|
300,000
|
||||||||||||||||||
SWEPCo
|
240,786
|
48,979
|
70,927
|
29,653
|
53,955
|
350,000
|
Six
Months Ended June 30,
|
||||||||
2007
|
2006
|
|||||||
Maximum
Interest Rate
|
5.46 | % | 5.39 | % | ||||
Minimum
Interest Rate
|
5.30 | % | 4.19 | % |
Average
Interest Rate for Funds
Borrowed
from the Utility Money Pool for
Six
Months Ended June 30,
|
Average
Interest Rate for Funds
Loaned
to the Utility Money Pool for
Six
Months Ended June 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Company
|
(in
percentage)
|
|||||||||||||||
APCo
|
5.36
|
4.62
|
-
|
5.05
|
||||||||||||
CSPCo
|
5.37
|
4.73
|
5.33
|
4.91
|
||||||||||||
I&M
|
5.35
|
4.76
|
-
|
-
|
||||||||||||
OPCo
|
5.35
|
4.86
|
5.43
|
5.30
|
||||||||||||
PSO
|
5.36
|
4.91
|
-
|
-
|
||||||||||||
SWEPCo
|
5.36
|
4.92
|
5.34
|
-
|
June
30, 2007
|
December
31, 2006
|
|||||||||||||||||||
Type
of Debt
|
Outstanding
Amount
|
Interest
Rate
|
Outstanding
Amount
|
Interest
Rate
|
||||||||||||||||
Company
|
(in
millions)
|
(in
millions)
|
||||||||||||||||||
OPCo
|
Commercial
Paper – JMG
|
$ |
-
|
-
|
$ |
1
|
5.56 | % | ||||||||||||
SWEPCo
|
Line
of Credit – Sabine
|
22
|
6.20 | % |
17
|
6.38 | % |
Company
|
(in
millions)
|
|||
APCo
|
$
|
70.2
|
||
CSPCo
|
38.8
|
|||
I&M
|
41.3
|
|||
OPCo
|
53.3
|
Company
|
(in
millions)
|
|||
APCo
|
$
|
12.0
|
||
CSPCo
|
6.7
|
|||
I&M
|
7.0
|
|||
OPCo
|
9.1
|
·
|
Requirements
under the Clean Air Act (CAA) to reduce
emissions of sulfur dioxide (SO2), nitrogen oxide
(NOx), particulate matter (PM) and mercury from fossil
fuel-fired power plants; and
|
·
|
Requirements
under the Clean Water Act (CWA) to reduce the
impacts of water intake structures on aquatic species at certain
power
plants.
|
Estimated
Compliance Investments
|
||||
Company
|
(in
millions)
|
|||
APCo
|
$ |
21
|
||
CSPCo
|
19
|
|||
I&M
|
118
|
|||
OPCo
|
31
|
Company
|
(in
thousands)
|
|||
APCo
|
$
|
2,685
|
||
CSPCo
|
3,022
|
|||
I&M
|
(327
|
)
|
||
OPCo
|
5,380
|
|||
PSO
|
386
|
|||
SWEPCo
|
1,642
|
Period
|
Total
Number
of
Shares
Purchased
|
Average
Price
Paid
per Share
|
Total
Number of Shares Purchased as Part of Publicly
Announced Plans or Programs
|
Maximum
Number (or Approximate Dollar Value) of
Shares that May Yet Be Purchased Under the Plans or
Programs
|
|||||||||||||
04/01/07
–
04/30/07
|
-
|
$ |
-
|
-
|
$ |
-
|
|||||||||||
05/01/07
–
05/31/07
|
2
|
(a)
|
73
|
-
|
-
|
||||||||||||
06/01/07
–
06/30/07
|
20
|
(b)
|
70
|
-
|
-
|
(a)
|
I&M repurchased 2 shares of its 4.13% cumulative
preferred stock, in a privately-negotiated transaction outside
of an
announced program.
|
(b)
|
I&M repurchased 20 shares of its 4.13% cumulative
preferred stock, in privately-negotiated transactions outside of
an
announced program.
|
1.
|
Election
of thirteen directors to hold office until the next
annual meeting and until their successors are duly
elected. Each nominee for director received the votes of
shareholders as follows:
|
Number
of Shares Voted For
|
Number
of Shares Abstaining
|
|||||||
E.
R. Brooks
|
334,998,592
|
8,663,576
|
||||||
Donald
M. Carlton
|
336,014,182
|
7,647,986
|
||||||
Ralph
D. Crosby, Jr.
|
335,978,026
|
7,684,142
|
||||||
John
P. DesBarres
|
335,974,155
|
7,688,013
|
||||||
Robert
W. Fri
|
332,637,218
|
11,024,950
|
||||||
Linda
A. Goodspeed
|
336,200,472
|
7,461,696
|
||||||
William
R. Howell
|
335,739,069
|
7,923,099
|
||||||
Lester
A. Hudson, Jr.
|
333,116,412
|
10,545,756
|
||||||
Michael
G. Morris
|
332,139,748
|
11,522,420
|
||||||
Lionel
L. Nowell, III
|
336,254,000
|
7,408,168
|
||||||
Richard
L. Sandor
|
332,152,005
|
11,510,163
|
||||||
Donald
G. Smith
|
333,270,480
|
10,391,688
|
||||||
Kathryn
D. Sullivan
|
336,273,055
|
7,389,113
|
|
2.
|
Approval
of the AEP Senior Officer Incentive Plan. The proposal was
approved by a vote of the shareholders as
follows:
|
Votes
FOR
|
317,166,316
|
||
Votes
AGAINST
|
20,791,784
|
||
Votes
ABSTAINED
|
5,704,068
|
|
3.
|
Ratification
of the appointment of the firm of Deloitte & Touche LLP as the
independent registered public accounting firm for 2007. The
proposal was approved by a vote of the shareholders as
follows:
|
Votes
FOR
|
335,620,502
|
||
Votes
AGAINST
|
4,752,625
|
||
Votes
ABSTAINED
|
3,289,041
|
Nicholas
K. Akins
|
Robert
P. Powers
|
||
Carl
L. English
|
Stephen
P. Smith
|
||
John
B. Keane
|
Susan
Tomasky
|
||
Holly
K. Koeppel
|
Dennis
E. Welch
|
||
Michael
G. Morris
|
Nicholas
K. Akins
|
Marc
E. Lewis
|
||
Karl
G. Boyd
|
Susanne
M. Moorman Rowe
|
||
Carl
L. English
|
Michael
G. Morris
|
||
Allen
R. Glassburn
|
Helen
J. Murray
|
||
JoAnn
M. Grevenow
|
Robert
P. Powers
|
||
Patrick
C. Hale
|
Susan
Tomasky
|
||
Holly
K. Koeppel
|
Nicholas
K. Akins
|
Robert
P. Powers
|
||
Carl
L. English
|
Stephen
P. Smith
|
||
John
B. Keane
|
Susan
Tomasky
|
||
Holly
K. Koeppel
|
Dennis
E. Welch
|
||
Michael
G. Morris
|
Nicholas
K. Akins
|
Holly
K. Koeppel
|
||
Carl
L. English
|
Stephen
P. Smith
|
||
Thomas
M. Hagan
|
Susan
Tomasky
|
||
John
B. Keane
|
Dennis
E. Welch
|
||
Michael
G. Morris
|
AMERICAN
ELECTRIC POWER COMPANY, INC.
|
By: /s/Joseph
M. Buonaiuto
|
Joseph
M. Buonaiuto
|
Controller
and Chief Accounting Officer
|
APPALACHIAN
POWER COMPANY
|
COLUMBUS
SOUTHERN POWER COMPANY
|
INDIANA
MICHIGAN POWER COMPANY
|
OHIO
POWER COMPANY
|
PUBLIC
SERVICE COMPANY OF OKLAHOMA
|
SOUTHWESTERN
ELECTRIC POWER COMPANY
|
By: /s/Joseph
M. Buonaiuto
|
Joseph
M. Buonaiuto
|
Controller
and Chief Accounting Officer
|
Date: August 3, 2007 |