2013 Reversal Of Previously Recorded Regulatory Disallowances

  
  
June 2022 Storm Costs  
In June 2022, the service territory of OPCo was impacted by strong winds from multiple storms resulting in power outages and damage to the transmission and distribution infrastructures. As of June 30, 2022, OPCo had incurred approximately $14 million in incremental operation and maintenance costs related to service restoration efforts. The incremental storm restoration costs have been deferred as regulatory assets and OPCo is expected to seek recovery in a future filing. In July 2022, intervenors filed a motion requesting the PUCO open a formal investigation into the power outages that occurred as a result of the June storms and determine if OPCo was negligent and liable to consumers for damages incurred as a result of the power outages. If any of the storm restoration costs are not recoverable, it could reduce future net income and cash flows and impact financial condition.  
PSO Rate Matters (Applies to AEP and PSO)  
February 2021 Severe Winter Weather Impacts in SPP  
In February 2021, severe winter weather had a significant impact in SPP, resulting in the declaration of Energy Emergency Alert Levels 2 and 3 for the first time in SPP’s history. The winter storm increased the demand for natural gas and restricted the available natural gas supply resulting in significantly increased market prices for natural gas power plants to meet reliability needs for the SPP electric system. For the time period of February 9, 2021, to February 20, 2021, PSO’s natural gas expenses and purchases of electricity still to be recovered from customers are $684 million as of June 30, 2022.  
In April 2021, the OCC approved a waiver for PSO allowing the deferral of the extraordinary fuel and purchases of electricity, including a carrying charge at an interim rate of 0.75%, over a longer time period than what the FAC traditionally allows. In January 2022, PSO, OCC staff and certain intervenors filed a joint stipulation and settlement agreement with the OCC to approve PSO’s securitization of the extraordinary fuel and purchases of electricity. The agreement includes a determination that all of PSO’s extraordinary fuel and purchases of electricity were prudent and reasonable and a 0.75% carrying charge, subject to true-up based on actual financing costs. In February 2022, the OCC approved the joint stipulation and settlement agreement in its financing order. In May 2022, the Supreme Court of Oklahoma approved the issuance of the securitization bonds. PSO expects to complete the securitization process in 2022, subject to market conditions.   
SWEPCo Rate Matters (Applies to AEP and SWEPCo)  
2012 Texas Base Rate Case  
In 2012, SWEPCo filed a request with the PUCT to increase annual base rates primarily due to the completion of the Turk Plant. In 2013, the PUCT issued an order affirming the prudence of the Turk Plant but determined that the Turk Plant’s Texas jurisdictional capital cost cap established in a previous Certificate of Convenience and Necessity case also limited SWEPCo’s recovery of AFUDC in addition to limits on its recovery of cash construction costs.  
Upon rehearing in 2014, the PUCT reversed its initial ruling and determined that AFUDC was excluded from the Turk Plant’s Texas jurisdictional capital cost cap. As a result, SWEPCo reversed $114 million of a previously recorded regulatory disallowance in 2013. In 2017, the Texas District Court upheld the PUCT’s 2014 order and intervenors filed appeals with the Texas Third Court of Appeals.  
In July 2018, the Texas Third Court of Appeals reversed the PUCT’s judgment affirming the prudence of the Turk Plant and remanded the issue back to the PUCT. In January 2019, SWEPCo and the PUCT filed petitions for review with the Texas Supreme Court. In March 2021, the Texas Supreme Court issued an opinion reversing the July 2018 judgment of the Texas Third Court of Appeals and agreeing with the PUCT’s judgment affirming the prudence of the Turk Plant. In addition, the Texas Supreme Court remanded the AFUDC dispute back to the Texas Third Court of Appeals. No parties filed a motion for rehearing with the Texas Supreme Court. In August 2021, 163
