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
|
||
0-18135
|
AEP
GENERATING COMPANY (An Ohio Corporation)
|
31-1033833
|
||
0-346
|
AEP
TEXAS CENTRAL COMPANY (A Texas Corporation)
|
74-0550600
|
||
0-340
|
AEP
TEXAS NORTH COMPANY (A Texas Corporation)
|
75-0646790
|
||
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
|
||
1-6858
|
KENTUCKY
POWER COMPANY (A Kentucky Corporation)
|
61-0247775
|
||
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 AEP Generating Company, AEP Texas Central
Company,
AEP Texas North Company, Appalachian Power Company, Columbus Southern
Power Company, Indiana Michigan Power Company, Kentucky 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
|
Aggregate
market value of voting and non-voting common equity held by non-affiliates
of the registrants as
of June 30, 2006, the last trading date of the registrants’ most recently
completed second fiscal quarter
|
Number
of shares of common stock outstanding of the registrants
at
July
31, 2006
|
|||
AEP
Generating Company
|
None
|
1,000
|
||
($1,000
par value)
|
||||
AEP
Texas Central Company
|
None
|
2,211,678
|
||
($25
par value)
|
||||
AEP
Texas North Company
|
None
|
5,488,560
|
||
($25
par value)
|
||||
American
Electric Power Company, Inc.
|
$13,492,667,933
|
393,975,064
|
||
($6.50
par value)
|
||||
Appalachian
Power Company
|
None
|
13,499,500
|
||
(no
par value)
|
||||
Columbus
Southern Power Company
|
None
|
16,410,426
|
||
(no
par value)
|
||||
Indiana
Michigan Power Company
|
None
|
1,400,000
|
||
(no
par value)
|
||||
Kentucky
Power Company
|
None
|
1,009,000
|
||
($50
par value)
|
||||
Ohio
Power Company
|
None
|
27,952,473
|
||
(no
par value)
|
||||
Public
Service Company of Oklahoma
|
None
|
9,013,000
|
||
($15
par value)
|
||||
Southwestern
Electric Power Company
|
None
|
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
|
||||
AEP
Generating Company:
|
||||
Management’s
Narrative Financial Discussion and Analysis
|
||||
Condensed
Financial Statements
|
||||
Index
to Condensed Notes to Condensed Financial Statements of Registrant
Subsidiaries
|
||||
AEP
Texas Central Company and Subsidiary:
|
||||
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
|
||||
AEP
Texas North Company:
|
||||
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
|
||||
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
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
|
||||
Kentucky
Power Company:
|
||||||||
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
|
||||||||
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
|
||||||||
Item
4.
|
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
4.
|
Submission
of Matters to a Vote of Security Holders
|
|||||||
Item
5.
|
Other
Information
|
|||||||
Item
6.
|
Exhibits:
|
|||||||
Exhibit
10(a)
|
||||||||
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., AEP Generating Company, AEP Texas Central Company, AEP Texas
North
Company, Appalachian Power Company, Columbus Southern Power Company,
Indiana Michigan Power Company, Kentucky 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
|
ADFIT
|
Accumulated
Deferred Federal Income Taxes.
|
||
ADITC
|
Accumulated
Deferred Investment Tax Credits.
|
||
AEGCo
|
AEP
Generating Company, an AEP electric generating
subsidiary.
|
||
AEP
or Parent
|
American
Electric Power Company, Inc.
|
||
AEP
Consolidated
|
AEP
and its majority owned consolidated subsidiaries and consolidated
entities.
|
||
AEP
East companies
|
APCo,
CSPCo, I&M, KPCo and OPCo.
|
||
AEPES
|
AEP
Energy Services, Inc., a subsidiary of AEP Resources,
Inc.
|
||
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.
|
||
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.
|
||
APCo
|
Appalachian
Power Company, an AEP electric utility subsidiary.
|
||
CAA
|
Clean
Air Act.
|
||
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.).
|
||
CSW
Operating Agreement
|
Agreement,
dated January 1, 1997, by and among PSO, SWEPCo, TCC and TNC governing
their generating capacity allocation. AEPSC acts as the
agent.
|
||
CTC
|
Competition
Transition Charge.
|
||
DETM
|
Duke
Energy Trading and Marketing L.L.C., a risk management
counterparty.
|
||
EDFIT
|
Excess
Deferred Federal Income Taxes.
|
||
EITF
|
Financial
Accounting Standards Board’s Emerging Issues Task
Force.
|
||
EPACT
|
Energy
Policy Act of 2005.
|
||
ERCOT
|
Electric
Reliability Council of Texas.
|
||
FASB
|
Financial
Accounting Standards Board.
|
||
Federal
EPA
|
United
States Environmental Protection Agency.
|
||
FERC
|
Federal
Energy Regulatory Commission.
|
||
GAAP
|
Accounting
Principles Generally Accepted in the United States of
America.
|
||
HPL
|
Houston
Pipe Line Company LP, a former AEP subsidiary that was sold in
January
2005.
|
||
IGCC
|
Integrated
Gasification Combined Cycle, technology that turns coal into a
cleaner-burning gas.
|
||
I&M
|
Indiana
Michigan Power Company, an AEP electric utility
subsidiary.
|
||
IRS
|
Internal
Revenue Service.
|
||
IPP
|
Independent
Power Producers.
|
||
IURC
|
Indiana
Utility Regulatory Commission.
|
||
KPCo
|
Kentucky
Power Company, an AEP electric utility subsidiary.
|
||
KPSC
|
Kentucky
Public Service Commission.
|
||
kV
|
Kilovolt.
|
||
KWH
|
Kilowatthour.
|
||
MISO
|
Midwest
Independent Transmission System Operator.
|
||
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.
|
|
PJM
|
Pennsylvania
- New Jersey - Maryland regional transmission
organization.
|
|
PSO
|
Public
Service Company of Oklahoma, an AEP electric utility
subsidiary.
|
|
PTB
|
Price-to-Beat.
|
|
PUCO
|
Public
Utilities Commission of Ohio.
|
|
PUCT
|
Public
Utility Commission of Texas.
|
|
PURPA
|
Public
Utility Regulatory Policies Act of 1978.
|
|
Registrant
Subsidiaries
|
AEP
subsidiaries which are SEC registrants; AEGCo, APCo, CSPCo, I&M, KPCo,
OPCo, PSO, SWEPCo, TCC and TNC.
|
|
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 FASB.
|
|
SFAS
133
|
Statement
of Financial Accounting Standards No. 133, “Accounting for Derivative
Instruments and Hedging Activities.”
|
|
SIA
|
System
Integration Agreement.
|
|
SO2
|
Sulfur
Dioxide.
|
|
SPP
|
Southwest
Power Pool.
|
|
STP
|
South
Texas Project Nuclear Generating Plant.
|
|
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 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.
|
·
|
Our
ability to sell assets at acceptable prices and other acceptable
terms.
|
·
|
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.
|
·
|
Changes
in the financial markets, particularly those affecting the availability
of
capital and our ability to refinance existing debt at attractive
rates.
|
·
|
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 implementation of EPACT and membership
in
and integration into regional transmission structures.
|
·
|
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.
|
·
|
In
April 2006, the PUCO approved our recovery of the pre-construction
costs
for the IGCC clean-coal plant in Meigs County, Ohio. We subsequently
submitted tariffs and received PUCO approval to recover $24 million
of our
IGCC pre-construction costs beginning July 1, 2006.
|
·
|
In
May 2006, we filed a base rate case in Virginia requesting a net
rate
increase of $198 million. Rates will be effective, subject to refund,
on
October 2, 2006.
|
·
|
In
May 2006, the PUCO approved a two-step increase in transmission
rates with
an over/under recovery mechanism effective April 1, 2006. We subsequently
submitted tariffs and received PUCO approval to implement the rates
in
June 2006. We expect this order to increase 2006 revenues by $63
million.
|
·
|
In
June 2006, we received a financing order from the PUCT to issue
$1.7
billion in securitization bonds. We anticipate issuing the bonds
and
receiving the proceeds by the end of September 2006. We intend
to use the
proceeds to reduce a portion of TCC’s debt and equity, which would include
a dividend payment to AEP.
|
·
|
In
July 2006, an ALJ rendered an initial decision to the FERC recommending
that current transmission rates in PJM are unjust and unreasonable
and
should be redesigned to replace the PJM license plate rates effective
April 1, 2006. If approved by the FERC, the new regional rates
should
result in parties outside of the AEP zone in PJM contributing a
significant portion of AEP’s transmission revenue requirement, some of
which may be treated as a credit to retail customers. The favorable
impact
of the initial ALJ decision is not determinable pending the decision
of
the FERC and subject to analysis of credits to retail customers,
if
any.
|
·
|
In
July 2006, the FERC approved our request for use of an incentive
rate
treatment for our proposed 550-mile I-765 transmission line project.
The
approval is conditioned upon PJM including the project in its formal
Regional Transmission Expansion Plan, which should be finalized
in 2006 or
early 2007.
|
·
|
In
July 2006, the West Virginia Public Service Commission approved
a
settlement agreement in APCo and WPCo’s base rate case, providing for a
$44 million annual increase in rates effective July 28, 2006. These
rates
include a surcharge for recovery of the cost of the Wyoming-Jacksons
Ferry
765 kV line, which was energized and placed in service in June
2006.
|
Utility
Operations
|
||
·
|
Generation
of electricity for sale to U.S. retail and wholesale
customers.
|
|
·
|
Electricity
transmission and distribution in the U.S.
|
|
Investments
-
Other
|
||
·
|
Bulk
commodity barging operations, wind farms, IPPs and other energy
supply-related businesses.
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
||||||||||||||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||||||||||||||
Earnings
|
EPS
(c)
|
Earnings
|
EPS
(c)
|
Earnings
|
EPS
(c)
|
Earnings
|
EPS
(c)
|
||||||||||||||||||
Utility
Operations
|
$
|
160
|
$
|
0.41
|
$
|
247
|
$
|
0.64
|
$
|
525
|
$
|
1.33
|
$
|
600
|
$
|
1.54
|
|||||||||
Investments
- Other
|
13
|
0.03
|
(1
|
)
|
-
|
29
|
0.08
|
4
|
0.01
|
||||||||||||||||
All
Other (a)
|
(3
|
)
|
-
|
(26
|
)
|
(0.06
|
)
|
(5
|
)
|
(0.01
|
)
|
(40
|
)
|
(0.10
|
)
|
||||||||||
Investments
- Gas Operations (b)
|
2
|
-
|
(2
|
)
|
(0.01
|
)
|
1
|
-
|
8
|
0.02
|
|||||||||||||||
Income
Before Discontinued Operations
|
$
|
172
|
$
|
0.44
|
$
|
218
|
$
|
0.57
|
$
|
550
|
$
|
1.40
|
$
|
572
|
$
|
1.47
|
|||||||||
Weighted
Average Number of Basic
Shares Outstanding
|
394
|
384
|
394
|
389
|
(a)
|
All
Other includes the parent company’s interest income and expense, as well
as other nonallocated costs.
|
|
(b)
|
We
sold our remaining gas pipeline and storage assets in
2005.
|
|
(c)
|
The
earnings per share of any segment does not represent a direct legal
interest in the assets and liabilities allocated to any one segment
but
rather represents a direct equity interest in AEP’s assets and liabilities
as a whole.
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||
2006
|
2005
|
2006
|
2005
|
|||||||||
(in
millions)
|
||||||||||||
Revenues
|
$
|
2,799
|
$
|
2,702
|
$
|
5,768
|
$
|
5,386
|
||||
Fuel
and Purchased Energy
|
1,126
|
988
|
2,253
|
1,911
|
||||||||
Gross
Margin
|
1,673
|
1,714
|
3,515
|
3,475
|
||||||||
Depreciation
and Amortization
|
339
|
317
|
672
|
635
|
||||||||
Other
Operating Expenses
|
987
|
938
|
1,833
|
1,743
|
||||||||
Operating
Income
|
347
|
459
|
1,010
|
1,097
|
||||||||
Other
Income, Net
|
43
|
49
|
85
|
79
|
||||||||
Interest
Expense and Preferred Stock Dividend Requirements
|
160
|
156
|
314
|
300
|
||||||||
Income
Tax Expense
|
70
|
105
|
256
|
276
|
||||||||
Income
Before Discontinued Operations
|
$
|
160
|
$
|
247
|
$
|
525
|
$
|
600
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
(in
millions of KWH)
|
|||||||||||||
Energy
Summary
|
|||||||||||||
Retail:
|
|||||||||||||
Residential
|
9,590
|
9,956
|
22,528
|
23,180
|
|||||||||
Commercial
|
9,440
|
9,573
|
18,349
|
18,305
|
|||||||||
Industrial
|
13,716
|
13,480
|
26,937
|
26,253
|
|||||||||
Miscellaneous
|
625
|
639
|
1,214
|
1,284
|
|||||||||
Subtotal
|
33,371
|
33,648
|
69,028
|
69,022
|
|||||||||
Texas
Retail and Other
|
138
|
161
|
206
|
389
|
|||||||||
Total
Retail
|
33,509
|
33,809
|
69,234
|
69,411
|
|||||||||
Wholesale
|
10,822
|
11,745
|
21,667
|
24,380
|
|||||||||
Texas
Wires Delivery
|
6,915
|
6,736
|
12,461
|
12,254
|
|||||||||
Total KWHs | 51,246 | 52,290 | 103,362 | 106,045 |
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||
2006
|
2005
|
2006
|
2005
|
|||||||||
(in
degree days)
|
||||||||||||
Weather
Summary
|
||||||||||||
Eastern
Region
|
||||||||||||
Actual
- Heating (a)
|
107
|
165
|
1,563
|
1,939
|
||||||||
Normal
- Heating (b)
|
175
|
177
|
1,992
|
1,988
|
||||||||
Actual
- Cooling (c)
|
228
|
288
|
229
|
288
|
||||||||
Normal
- Cooling (b)
|
279
|
278
|
282
|
281
|
||||||||
Western
Region
(d)
|
||||||||||||
Actual
- Heating (a)
|
5
|
26
|
663
|
795
|
||||||||
Normal
- Heating (b)
|
33
|
33
|
1,005
|
1,005
|
||||||||
Actual
- Cooling (c)
|
815
|
681
|
858
|
701
|
||||||||
Normal
- Cooling (b)
|
652
|
644
|
669
|
662
|
(a)
|
Eastern
Region and Western Region heating degree days are calculated on
a 55
degree temperature base.
|
|
(b)
|
Normal
Heating/Cooling represents the 30-year average of degree
days.
|
|
(c)
|
Eastern
Region and Western Region cooling days are calculated on a 65 degree
temperature base.
|
|
(d)
|
Western
Region statistics represent PSO/SWEPCo customer base only.
|
Second
Quarter of 2005
|
$
|
247
|
|||||
Changes
in Gross Margin:
|
|||||||
Retail
Margins
|
56
|
||||||
Off-system
Sales
|
(49
|
)
|
|||||
Transmission
Revenues
|
(55
|
)
|
|||||
Other
|
7
|
||||||
Total
Change in Gross Margin
|
(41
|
)
|
|||||
Changes
in Operating Expenses and Other:
|
|||||||
Maintenance
and Other Operation
|
(34
|
)
|
|||||
Depreciation
and Amortization
|
(22
|
)
|
|||||
Taxes
Other Than Income Taxes
|
(15
|
)
|
|||||
Other
Income, Net
|
(6
|
)
|
|||||
Interest
and Other Charges
|
(4
|
)
|
|||||
Total
Change in Operating Expenses and Other
|
(81
|
)
|
|||||
Income
Tax Expense
|
35
|
||||||
Second
Quarter of 2006
|
$
|
160
|
·
|
Retail
Margins increased $56 million primarily due to the
following:
|
|
·
|
A
$55 million increase related to new rates implemented in our Ohio
jurisdictions as approved by the PUCO in our Rate Stabilization
Plans
(RSPs) and a $10 million increase related to new rates implemented
in
Kentucky as approved in our base rate case;
|
|
·
|
A
$30 million increase in financial transmission rights revenue,
net of
congestion costs, due to improved management of price risk related
to
serving retail load within PJM under current transmission constraints;
|
|
·
|
An
$18 million increase related to reduced off-system sales margins
shared
with customers due to lower off-system sales; and
|
|
·
|
A
$14 million increase related to increased usage and customer growth
in the
industrial and commercial classes of which $11 million relates
to the
purchase of the Ohio service territory of Monongahela Power in
December
2005; partially offset by
|
|
·
|
A
$68 million increase in delivered fuel costs, which relates to
the AEP
East companies with inactive, capped or frozen fuel clauses;
and
|
|
·
|
An
$11 million decrease in usage related to mild weather. As compared
to the
prior year, our eastern region experienced a 21% decrease in cooling
degree days, partially offset by a 20% increase in cooling degree
days in
the western region.
|
|
·
|
Margins
from Off-system Sales for 2006 decreased $49 million due to lower
volumes
in part from the sale of STP in May 2005, a forced outage in 2006
at the
Oklaunion plant, various eastern fleet outages in 2006 for boiler
tube
inspections and lower optimization activities.
|
|
·
|
Transmission
Revenues decreased $55 million primarily due to the elimination
of SECA
revenues as of April 1, 2006 and a provision of $18 million recorded
in
the second quarter of 2006 related to potential SECA refunds pending
settlement negotiations with various intervenors. At this time,
SECA
revenues have not been replaced. See the “SECA Revenue Subject to Refund”
section of Note 3.
|
·
|
Maintenance
and Other Operation expenses increased $34 million primarily due
to
increases in generation expenses for planned and forced plant outages,
increases in transmission and distribution expenses related to
tree
trimming and storm restoration and the establishment of a regulatory
asset
for PJM administrative fees in 2005 which reduced expenses in the
prior
period, offset by decreases related to the sale of STP in May
2005.
|
·
|
Depreciation
and Amortization expense increased $22 million primarily due to
increased
Ohio regulatory asset amortization in conjunction with rate increases
as
well as higher depreciable property balances.
|
·
|
Taxes
Other Than Income Taxes increased $15 million primarily due to
increased
real and personal property taxes.
|
·
|
Income
Tax Expense decreased $35 million due to the decrease in pretax
income.
|
Six
Months Ended June 30, 2005
|
$
|
600
|
|||||
Changes
in Gross Margin:
|
|||||||
Retail
Margins
|
168
|
||||||
Off-system
Sales
|
(73
|
)
|
|||||
Transmission
Revenues
|
(54
|
)
|
|||||
Other
|
(1
|
)
|
|||||
Total
Change in Gross Margin
|
40
|
||||||
Changes
in Operating Expenses and Other:
|
|||||||
Maintenance
and Other Operation
|
(28
|
)
|
|||||
Gain
on Sales of Assets, Net
|
(46
|
)
|
|||||
Depreciation
and Amortization
|
(37
|
)
|
|||||
Taxes
Other Than Income Taxes
|
(16
|
)
|
|||||
Other
Income, Net
|
6
|
||||||
Interest
and Other Charges
|
(14
|
)
|
|||||
Total
Change in Operating Expenses and Other
|
(135
|
)
|
|||||
Income
Tax Expense
|
20
|
||||||
Six
Months Ended June 30, 2006
|
$
|
525
|
·
|
Retail
Margins increased $168 million primarily due to the
following:
|
|
·
|
A
$103 million increase related to new rates implemented in our Ohio
jurisdictions as approved by the PUCO in our RSPs, a $10 million
increase
related to new rates implemented in Kentucky as approved in our
base rate
case and a $7 million increase related to new rates implemented
in
Oklahoma in June 2005;
|
|
·
|
A
$76 million increase in financial transmission rights revenue,
net of
congestion costs, due to improved management of price risk related
to
serving retail load within PJM under current transmission
constraints;
|
|
·
|
A
$41 million increase related to increased usage and customer growth
in the
industrial and commercial classes of which $21 million relates
to the
purchase of the Ohio service territory of Monongahela Power in
December
2005;
|
|
·
|
An
$18 million increase related to reduced off-system sales margins
shared
with customers due to lower off-system sales; and
|
|
·
|
A
$29 million increase related to increased sales to municipal, cooperative
and other wholesale customers primarily as a result of new power
supply
contracts; partially offset by
|
|
·
|
A
$109 million increase in delivered fuel cost, which relates to
AEP East
companies with inactive, capped or frozen fuel clauses;
and
|
|
·
|
A
$37 million decrease in usage related to mild weather. As compared
to the
prior year, our eastern region and western region experienced 19%
and 17%
declines, respectively, in heating degree days. These decreases
were
partially offset by an increase of 22% in cooling degree days in
the
western region.
|
|
·
|
Margins
from Off-system Sales for 2006 were $73 million lower than in 2005
due to
lower volumes in part from the sale of STP in May 2005, a forced
outage in
2006 at the Oklaunion plant, various eastern fleet outages in 2006
for
boiler tube inspections and lower optimization
activities.
|
|
·
|
Transmission
Revenues decreased $54 million primarily due to the elimination
of SECA
revenues as of April 1, 2006 and a provision of $19 million recorded
in
2006 related to potential SECA refunds pending settlement negotiations
with various intervenors. At this time, SECA revenues have not
been
replaced. See the “SECA Revenue Subject to Refund” section of Note
3.
|
·
|
Maintenance
and Other Operation expenses increased $28 million primarily due
to
increases in generation expenses related to base operations, maintenance
and planned and forced plant outages, distribution expenses related
to
tree trimming and the establishment of a regulatory asset for PJM
administrative fees in 2005 which reduced expenses in the prior
period,
offset by favorable variances related to expenses from the January
2005
ice storm in Ohio and Indiana and decreases related to the sale
of STP in
May 2005.
|
·
|
Gain
on Sales of Assets, Net decreased $46 million resulting from revenues
related to the earnings sharing agreement with Centrica as stipulated
in
the purchase-and-sale agreement from the sale of our REPs in 2002.
In
2005, we reached a settlement with Centrica and received $112 million
related to two years of earnings sharing whereas in 2006 we received
$70
million related to one year of earnings sharing.
|
·
|
Depreciation
and Amortization expense increased $37 million primarily due to
increased
Ohio regulatory asset amortization in conjunction with rate increases
as
well as higher depreciable property balances.
|
·
|
Taxes
Other Than Income Taxes increased $16 million primarily due to
increased
real and personal property taxes.
|
·
|
Interest
and Other Charges increased $14 million from the prior period primarily
due to additional debt issued in late 2005 and early 2006 and increasing
interest rates.
|
·
|
Income
Tax Expense decreased $20 million due to the decrease in pretax
income.
|
June
30, 2006
|
December
31, 2005
|
||||||||||||
Long-term
Debt, including amounts due within one year
|
$
|
12,645
|
56.7
|
%
|
$
|
12,226
|
57.2
|
%
|
|||||
Short-term
Debt
|
159
|
0.7
|
10
|
0.0
|
|||||||||
Total
Debt
|
12,804
|
57.4
|
12,236
|
57.2
|
|||||||||
Common
Equity
|
9,426
|
42.3
|
9,088
|
42.5
|
|||||||||
Preferred
Stock
|
61
|
0.3
|
61
|
0.3
|
|||||||||
Total
Debt and Equity Capitalization
|
$
|
22,291
|
100.0
|
%
|
$
|
21,385
|
100.0
|
%
|
Amount |
Maturity
|
||||||
(in millions) | |||||||
Commercial
Paper Backup:
|
|||||||
Revolving
Credit Facility
|
$
|
1,500
|
March
2010
|
||||
Revolving
Credit Facility
|
1,500
|
April
2011
|
|||||
Total
|
3,000
|
||||||
Cash
and Cash Equivalents
|
249
|
||||||
Total
Liquidity Sources
|
3,249
|
||||||
Less:
AEP Commercial Paper Outstanding
|
144
|
||||||
Letter
of Credit Drawn
|
31
|
||||||
Net
Available Liquidity
|
$
|
3,074
|
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,
|
|||||||
2006
|
2005
|
||||||
(in
millions)
|
|||||||
Cash
and Cash Equivalents at Beginning of Period
|
$
|
401
|
$
|
320
|
|||
Net
Cash Flows From Operating Activities
|
1,137
|
982
|
|||||
Net
Cash Flows From (Used For) Investing Activities
|
(1,586
|
)
|
458
|
||||
Net
Cash Flows From (Used For) Financing Activities
|
297
|
(1,153
|
)
|
||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
(152
|
)
|
287
|
||||
Cash
and Cash Equivalents at End of Period
|
$
|
249
|
$
|
607
|
Six
Months Ended
June
30,
|
|||||||
2006
|
2005
|
||||||
(in
millions)
|
|||||||
Net
Income
|
$
|
556
|
$
|
576
|
|||
Less:
Income From Discontinued Operations
|
(6
|
)
|
(4
|
)
|
|||
Income
From Continuing Operations
|
550
|
572
|
|||||
Noncash
Items Included in Earnings
|
634
|
611
|
|||||
Changes
in Assets and Liabilities
|
(47
|
)
|
(201
|
)
|
|||
Net
Cash Flows From Operating Activities
|
$
|
1,137
|
$
|
982
|
Six
Months Ended
June
30,
|
|||||||
2006
|
2005
|
||||||
(in
millions)
|
|||||||
Investment
Securities:
|
|||||||
Purchases
of Investment Securities
|
$
|
(5,647
|
)
|
$
|
(2,141
|
)
|
|
Sales
of Investment Securities
|
5,596
|
2,213
|
|||||
Change
in Investment Securities, Net
|
(51
|
)
|
72
|
||||
Construction
Expenditures
|
(1,625
|
)
|
(1,020
|
)
|
|||
Change
in Other Temporary Cash Investments, Net
|
3
|
(103
|
)
|
||||
Proceeds
from Sales of Assets
|
123
|
1,500
|
|||||
Other
|
(36
|
)
|
9
|
||||
Net
Cash Flows From (Used for) Investing Activities
|
$
|
(1,586
|
)
|
$
|
458
|
Six
Months Ended
June
30,
|
|||||||
2006
|
2005
|
||||||
(in
millions)
|
|||||||
Issuance
of Common Stock
|
$
|
6
|
$
|
28
|
|||
Repurchase
of Common Stock
|
-
|
(427
|
)
|
||||
Issuance/Retirement
of Debt, Net
|
552
|
(389
|
)
|
||||
Dividends
Paid on Common Stock
|
(291
|
)
|
(273
|
)
|
|||
Other
|
30
|
(92
|
)
|
||||
Net
Cash Flows From (Used for) Financing Activities
|
$
|
297
|
$
|
(1,153
|
)
|
June
30,
2006
|
December
31,
2005
|
||||||
(in
millions)
|
|||||||
AEP
Credit
|
$
|
560
|
$
|
516
|
|||
Rockport
Plant Unit 2
|
2,437
|
2,511
|
|||||
Railcars
|
31
|
31
|
(in
millions)
|
||||
Stranded
Generation Plant Costs
|
$
|
974
|
||
Net
Generation-related Regulatory Asset
|
249
|
|||
Excess
Earnings
|
(49
|
)
|
||
Recorded
Net Stranded Generation Plant Costs
|
1,174
|
|||
Recorded
Debt Carrying Costs on Net Stranded Generation Plant Costs
|
375
|
|||
Recorded
Securitizable True-up Regulatory Asset
|
1,549
|
|||
Unrecorded
But Recoverable Equity Carrying Costs
|
217
|
|||
Unrecorded
Estimated July 2006 - August 2006 Debt Carrying Costs
|
17
|
|||
Unrecorded
Excess Earnings, Related Carrying Costs and Other
|
52
|
|||
Settlement
Reduction
|
(77
|
)
|
||
Reduction
for ADITC and EDFIT Benefits
|
(61
|
)
|
||
Approved
Securitizable Amount
|
1,697
|
|||
Unrecorded
Securitization Issuance Costs
|
23
|
|||
Amount
to be Securitized
|
$
|
1,720
|
(in
millions)
|
||||
Wholesale
Capacity Auction True-up
|
$
|
61
|
||
Carrying
Costs on Wholesale Capacity Auction True-up
|
28
|
|||
Retail
Clawback including Carrying Costs
|
(63
|
)
|
||
Deferred
Over-recovered Fuel Balance
|
(181
|
)
|
||
Retrospective
ADFIT Benefit
|
(70
|
)
|
||
Other
|
(4
|
)
|
||
Recorded
Net Regulatory Liabilities - Other True-up Items
|
(229
|
)
|
||
Unrecorded
Prospective ADFIT Benefit
|
(240
|
)
|
||
Unrecorded
Estimated July 2006 - August 2006 Carrying Costs
|
(6
|
)
|
||
Gross
CTC Refund
|
(475
|
)
|
||
FERC
Jurisdictional Fuel Refund Deferral
|
16
|
|||
ADITC
and EDFIT Benefit Refund Deferral
|
97
|
|||
Net
CTC Refund Proposed, After Deferrals
|
(362
|
)
|
||
Rate
Case Expense Surcharge
|
7
|
|||
Net
Refund Proposed, After Deferrals and Expenses
|
$
|
(355
|
)
|
(in
millions)
|
||||
ADITC
and EDFIT Benefits Reducing Securitization
|
$
|
97
|
||
ADFIT
Benefit Applied to Reduce 2002 Securitization of Regulatory Assets
|
(64
|
)
|
||
Securitization
Settlement
|
(77
|
)
|
||
Unrecorded
Prospective ADFIT Benefit Increasing the CTC Refund
|
(240
|
)
|
||
Unrecorded
Equity Carrying Costs Recognized as Collected
|
217
|
|||
Future
Carrying Cost Payable on Proposed CTC Refund
|
(113
|
)
|
||
Deferred
Fuel - Federal Jurisdictional Issue
|
16
|
|||
Net
Adverse Earnings Impact Over 14 Years
|
$
|
(164
|
)
|
·
|
Requirements
under the CAA to reduce emissions of SO2,
NOx,
particulate matter (PM), and mercury from fossil fuel-fired power
plants;
|
·
|
Requirements
under the Clean Water Act (CWA) to reduce the impacts of water
intake
structures on aquatic species at certain of our power plants;
and
|
·
|
Possible
future requirements to reduce carbon dioxide (CO2)
emissions to address concerns about global climate
change.
|
Utility
Operations
|
Investments
- Gas Operations
|
Sub-Total
MTM Risk Management Contracts
|
PLUS:
MTM of Cash Flow and Fair Value Hedges
|
Total
|
|||||||||||
Current
Assets
|
$
|
431
|
$
|
123
|
$
|
554
|
$
|
65
|
$
|
619
|
|||||
Noncurrent
Assets
|
|
390
|
|
175
|
|
565
|
|
12
|
|
577
|
|||||
Total
Assets
|
|
821
|
|
298
|
|
1,119
|
|
77
|
|
1,196
|
|||||
Current
Liabilities
|
(338
|
)
|
(126
|
)
|
(464
|
)
|
(16
|
)
|
(480
|
)
|
|||||
Noncurrent
Liabilities
|
|
(235
|
)
|
|
(181
|
)
|
|
(416
|
)
|
|
(2
|
)
|
|
(418
|
)
|
Total
Liabilities
|
|
(573
|
)
|
|
(307
|
)
|
|
(880
|
)
|
|
(18
|
)
|
|
(898
|
)
|
Total
MTM Derivative
Contract Net
Assets (Liabilities)
|
$
|
248
|
$
|
(9
|
)
|
$
|
239
|
$
|
59
|
$
|
298
|
Utility
Operations
|
Investments-Gas
Operations
|
Total
|
||||||||
Total
MTM Risk Management Contract
Net Assets (Liabilities) at
December
31, 2005
|
$
|
215
|
$
|
(19
|
)
|
$
|
196
|
|||
(Gain)
Loss from Contracts Realized/Settled During
the Period and Entered in a Prior
Period
|
(8
|
)
|
8
|
-
|
||||||
Fair
Value of New Contracts at Inception When
Entered During the Period (a)
|
1
|
-
|
1
|
|||||||
Net
Option Premiums Paid/(Received) for Unexercised
or Unexpired Option Contracts
Entered During
The Period
|
13
|
-
|
13
|
|||||||
Changes
in Fair Value Due to Valuation Methodology
Changes on Forward Contracts
|
1
|
-
|
1
|
|||||||
Changes
in Fair Value due to Market Fluctuations During the Period
(b)
|
13
|
2
|
15
|
|||||||
Changes
in Fair Value Allocated to Regulated
Jurisdictions (c)
|
13
|
-
|
13
|
|||||||
Total
MTM Risk Management Contract Net
Assets (Liabilities) at
June 30, 2006
|
$
|
248
|
$
|
(9
|
)
|
239
|
||||
Net
Cash Flow and Fair Value Hedge Contracts
|
59
|
|||||||||
Ending
Net Risk Management Assets at June
30, 2006
|
$
|
298
|
(a)
|
Most
of the fair value comes from longer term fixed price contracts
with
customers that seek 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 in the
Condensed
Consolidated Statements of Operations. These net gains (losses)
are
recorded as regulatory assets/liabilities for those subsidiaries
that
operate in regulated jurisdictions. Approximately $7 million of
the
regulatory deferral change is due to the change in the SIA. See
the
“Allocation Agreement between AEP East companies and AEP West companies
and CSW Operating Agreement” section of Note
3.
|
·
|
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, giving an indication
of
when these MTM amounts will settle and generate
cash.
|
Remainder
2006
|
2007
|
2008
|
2009
|
2010
|
After
2010
|
Total
|
||||||||||||||||
Utility
Operations:
|
||||||||||||||||||||||
Prices
Actively Quoted - Exchange Traded Contracts
|
$
|
(11
|
)
|
$
|
1
|
$
|
14
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
4
|
|||||||
Prices
Provided by Other External Sources
- OTC Broker Quotes (a)
|
43
|
68
|
33
|
25
|
-
|
-
|
169
|
|||||||||||||||
Prices
Based on Models and Other Valuation
Methods (b)
|
20
|
(1
|
)
|
6
|
13
|
28
|
9
|
75
|
||||||||||||||
Total
|
$
|
52
|
$
|
68
|
$
|
53
|
$
|
38
|
$
|
28
|
$
|
9
|
$
|
248
|
||||||||
Investments
-
Gas
Operations:
|
||||||||||||||||||||||
Prices
Actively Quoted - Exchange Traded Contracts
|
$
|
(1
|
)
|
$
|
11
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
10
|
|||||||
Prices
Provided by Other External Sources
- OTC Broker Quotes (a)
|
(3
|
)
|
(8
|
)
|
-
|
-
|
-
|
-
|
(11
|
)
|
||||||||||||
Prices
Based on Models and Other Valuation
Methods (b)
|
(1
|
)
|
-
|
(1
|
)
|
(4
|
)
|
(3
|
)
|
1
|
(8
|
)
|
||||||||||
Total
|
$
|
(5
|
)
|
$
|
3
|
$
|
(1
|
)
|
$
|
(4
|
)
|
$
|
(3
|
)
|
$
|
1
|
$
|
(9
|
)
|
|||
Total:
|
||||||||||||||||||||||
Prices
Actively Quoted - Exchange Traded Contracts
|
$
|
(12
|
)
|
$
|
12
|
$
|
14
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
14
|
|||||||
Prices
Provided by Other External Sources
- OTC Broker Quotes (a)
|
40
|
60
|
33
|
25
|
-
|
-
|
158
|
|||||||||||||||
Prices
Based on Models and Other Valuation
Methods (b)
|
19
|
(1
|
)
|
5
|
9
|
25
|
10
|
67
|
||||||||||||||
Total
|
$
|
47
|
$
|
71
|
$
|
52
|
$
|
34
|
$
|
25
|
$
|
10
|
$
|
239
|
(a)
|
Prices
Provided by Other External Sources - OTC Broker Quotes reflects
information obtained from over-the-counter (OTC) brokers, industry
services, or multiple-party on-line platforms.
|
(b)
|
Prices
Based on Models and Other Valuation Methods is in the absence of
pricing
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.
|
Commodity
|
Transaction
Class
|
Market/Region
|
Tenor
|
|||
(in
Months)
|
||||||
Natural
Gas
|
Futures
|
NYMEX
/ Henry Hub
|
60
|
|||
Physical
Forwards
|
Gulf
Coast, Texas
|
21
|
||||
Swaps
|
Northeast,
Mid-Continent, Gulf Coast, Texas
|
21
|
||||
Exchange
Option Volatility
|
NYMEX
/ Henry Hub
|
12
|
||||
Power
|
Futures
|
AEP
East - PJM
|
36
|
|||
Physical
Forwards
|
AEP
East
|
42
|
||||
Physical
Forwards
|
AEP
West
|
42
|
||||
Physical
Forwards
|
West
Coast
|
42
|
||||
Peak
Power Volatility (Options)
|
AEP
East - Cinergy, PJM
|
12
|
||||
Emissions
|
Credits
|
SO2,
NOx
|
30
|
|||
Coal
|
Physical
Forwards
|
PRB,
NYMEX, CSX
|
30
|
|||
Power
and Gas
|
Interest
Rate
|
Total
|
||||||||
Beginning
Balance in AOCI, December 31, 2005
|
$
|
(6
|
)
|
$
|
(21
|
)
|
$
|
(27
|
)
|
|
Changes
in Fair Value
|
37
|
12
|
49
|
|||||||
Reclassifications
from AOCI to Net Income for Cash
Flow
Hedges Settled
|
3
|
2
|
5
|
|||||||
Ending
Balance in AOCI, June 30, 2006
|
$
|
34
|
$
|
(7
|
)
|
$
|
27
|
|||
After-Tax
Portion Expected to be Reclassified to
Earnings During
Next 12 Months
|
$
|
30
|
$
|
(1
|
)
|
$
|
29
|
Counterparty
Credit Quality
|
Exposure
Before Credit Collateral
|
Credit
Collateral
|
Net
Exposure
|
Number
of
Counterparties >10%
|
Net
Exposure
of
Counterparties >10%
|
|||||||||||
Investment
Grade
|
$
|
883
|
$
|
156
|
$
|
727
|
1
|
$
|
107
|
|||||||
Split
Rating
|
2
|
-
|
2
|
2
|
2
|
|||||||||||
Noninvestment
Grade
|
109
|
106
|
3
|
1
|
3
|
|||||||||||
No
External Ratings:
|
||||||||||||||||
Internal
Investment Grade
|
28
|
-
|
28
|
1
|
10
|
|||||||||||
Internal
Noninvestment Grade
|
58
|
13
|
45
|
3
|
43
|
|||||||||||
Total
as of June 30, 2006
|
$
|
1,080
|
$
|
275
|
$
|
805
|
8
|
$
|
165
|
|||||||
As of December 31, 2005 | $ | 1,366 | $ | 484 | $ | 882 | 10 | 322 |
Remainder
2006
|
2007
|
2008
|
||||
Estimated
Plant Output Hedged
|
91%
|
90%
|
88%
|
Six
Months Ended
June
30, 2006
|
Twelve
Months Ended
December
31, 2005
|
||||||||||||||||
(in
millions)
|
(in
millions)
|
||||||||||||||||
End
|
High
|
Average
|
Low
|
End
|
High
|
Average
|
Low
|
||||||||||
$2
|
$7
|
$3
|
$1
|
$3
|
$5
|
$3
|
$1
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
REVENUES
|
|||||||||||||
Utility
Operations
|
$
|
2,810
|
$
|
2,680
|
$
|
5,797
|
$
|
5,285
|
|||||
Gas
Operations
|
(15
|
)
|
19
|
(33
|
)
|
376
|
|||||||
Other
|
141
|
120
|
280
|
223
|
|||||||||
TOTAL
|
2,936
|
2,819
|
6,044
|
5,884
|
|||||||||
EXPENSES
|
|||||||||||||
Fuel
and Other Consumables Used for Electric Generation
|
888
|
804
|
1,849
|
1,593
|
|||||||||
Purchased
Energy for Resale
|
237
|
183
|
403
|
313
|
|||||||||
Purchased
Gas for Resale
|
-
|
1
|
-
|
250
|
|||||||||
Maintenance
and Other Operation
|
902
|
878
|
1,730
|
1,715
|
|||||||||
Gain/Loss
on Disposition of Assets, Net
|
-
|
-
|
(68
|
)
|
(115
|
)
|
|||||||
Depreciation
and Amortization
|
348
|
325
|
689
|
652
|
|||||||||
Taxes
Other Than Income Taxes
|
190
|
173
|
381
|
361
|
|||||||||
TOTAL
|
2,565
|
2,364
|
4,984
|
4,769
|
|||||||||
OPERATING
INCOME
|
371
|
455
|
1,060
|
1,115
|
|||||||||
Interest
and Investment Income
|
11
|
14
|
19
|
25
|
|||||||||
Carrying
Costs Income
|
33
|
36
|
63
|
56
|
|||||||||
Allowance
For Equity Funds Used During Construction
|
7
|
6
|
13
|
12
|
|||||||||
Gain
on Disposition of Equity Investments, Net
|
-
|
-
|
3
|
-
|
|||||||||
INTEREST
AND OTHER CHARGES
|
|||||||||||||
Interest
Expense
|
176
|
188
|
344
|
361
|
|||||||||
Preferred
Stock Dividend Requirements of Subsidiaries
|
-
|
3
|
1
|
5
|
|||||||||
TOTAL
|
176
|
191
|
345
|
366
|
|||||||||
INCOME
BEFORE INCOME TAX EXPENSE, MINORITY INTEREST EXPENSE AND EQUITY
EARNINGS (LOSS)
|
246
|
320
|
813
|
842
|
|||||||||
Income
Tax Expense
|
72
|
103
|
261
|
275
|
|||||||||
Minority
Interest Expense
|
1
|
1
|
1
|
2
|
|||||||||
Equity
Earnings (Loss) of Unconsolidated Subsidiaries
|
(1
|
)
|
2
|
(1
|
)
|
7
|
|||||||
INCOME
BEFORE DISCONTINUED OPERATIONS
|
172
|
218
|
550
|
572
|
|||||||||
DISCONTINUED
OPERATIONS, Net of Tax
|
3
|
3
|
6
|
4
|
|||||||||
NET
INCOME
|
$
|
175
|
$
|
221
|
$
|
556
|
$
|
576
|
|||||
WEIGHTED
AVERAGE NUMBER OF BASIC SHARES OUTSTANDING
|
394
|
384
|
394
|
389
|
|||||||||
BASIC
EARNINGS PER SHARE
|
|||||||||||||
Income
Before Discontinued Operations
|
$
|
0.44
|
$
|
0.57
|
$
|
1.40
|
$
|
1.47
|
|||||
Discontinued
Operations, Net of Tax
|
-
|
0.01
|
0.01
|
0.01
|
|||||||||
TOTAL
BASIC EARNINGS PER SHARE
|
$
|
0.44
|
$
|
0.58
|
$
|
1.41
|
$
|
1.48
|
|||||
WEIGHTED
AVERAGE NUMBER OF DILUTED SHARES
OUTSTANDING
|
396
|
385
|
396
|
390
|
|||||||||
DILUTED
EARNINGS PER SHARE
|
|||||||||||||
Income
Before Discontinued Operations
|
$
|
0.43
|
$
|
0.57
|
$
|
1.39
|
$
|
1.47
|
|||||
Discontinued
Operations, Net of Tax
|
0.01
|
0.01
|
0.02
|
0.01
|
|||||||||
TOTAL
DILUTED EARNINGS PER SHARE
|
$
|
0.44
|
$
|
0.58
|
$
|
1.41
|
$
|
1.48
|
|||||
CASH
DIVIDENDS PAID PER SHARE
|
$
|
0.37
|
$
|
0.35
|
$
|
0.74
|
$
|
0.70
|
|||||
2006
|
2005
|
||||||
CURRENT
ASSETS
|
|||||||
Cash
and Cash Equivalents
|
$
|
249
|
$
|
401
|
|||
Other
Temporary Cash Investments
|
173
|
127
|
|||||
Accounts
Receivable:
|
|||||||
Customers
|
659
|
826
|
|||||
Accrued
Unbilled Revenues
|
347
|
374
|
|||||
Miscellaneous
|
45
|
51
|
|||||
Allowance
for Uncollectible Accounts
|
(34
|
)
|
(31
|
)
|
|||
Total
Receivables
|
1,017
|
1,220
|
|||||
Fuel,
Materials and Supplies
|
865
|
726
|
|||||
Risk
Management Assets
|
619
|
926
|
|||||
Margin
Deposits
|
154
|
221
|
|||||
Regulatory
Asset for Under-Recovered Fuel Costs
|
74
|
197
|
|||||
Other
|
104
|
127
|
|||||
TOTAL
|
3,255
|
3,945
|
|||||
PROPERTY,
PLANT AND EQUIPMENT
|
|||||||
Electric:
|
|||||||
Production
|
16,877
|
16,653
|
|||||
Transmission
|
6,915
|
6,433
|
|||||
Distribution
|
11,073
|
10,702
|
|||||
Other
(including coal mining and nuclear fuel)
|
3,203
|
3,116
|
|||||
Construction
Work in Progress
|
2,423
|
2,217
|
|||||
Total
|
40,491
|
39,121
|
|||||
Accumulated
Depreciation and Amortization
|
15,093
|
14,837
|
|||||
TOTAL
- NET
|
25,398
|
24,284
|
|||||
OTHER
NONCURRENT ASSETS
|
|||||||
Regulatory
Assets
|
3,234
|
3,262
|
|||||
Securitized
Transition Assets and Other
|
572
|
593
|
|||||
Spent
Nuclear Fuel and Decommissioning Trusts
|
1,159
|
1,134
|
|||||
Investments
in Power and Distribution Projects
|
45
|
97
|
|||||
Goodwill
|
76
|
76
|
|||||
Long-term
Risk Management Assets
|
577
|
886
|
|||||
Employee
Benefits and Pension Assets
|
1,075
|
1,105
|
|||||
Other
|
747
|
746
|
|||||
TOTAL
|
7,485
|
7,899
|
|||||
Assets
Held for Sale
|
46
|
44
|
|||||
TOTAL
ASSETS
|
$
|
36,184
|
$
|
36,172
|
2006
|
2005
|
||||||||||||
CURRENT
LIABILITIES
|
(in
millions)
|
||||||||||||
Accounts
Payable
|
$
|
1,191
|
$
|
1,144
|
|||||||||
Short-term
Debt
|
159
|
10
|
|||||||||||
Long-term
Debt Due Within One Year
|
800
|
1,153
|
|||||||||||
Risk
Management Liabilities
|
480
|
906
|
|||||||||||
Accrued
Taxes
|
742
|
651
|
|||||||||||
Accrued
Interest
|
183
|
183
|
|||||||||||
Customer
Deposits
|
382
|
571
|
|||||||||||
Other
|
624
|
842
|
|||||||||||
TOTAL
|
4,561
|
5,460
|
|||||||||||
NONCURRENT
LIABILITIES
|
|||||||||||||
Long-term
Debt
|
11,845
|
11,073
|
|||||||||||
Long-term
Risk Management Liabilities
|
418
|
723
|
|||||||||||
Deferred
Income Taxes
|
4,792
|
4,810
|
|||||||||||
Regulatory
Liabilities and Deferred Investment Tax Credits
|
2,819
|
2,747
|
|||||||||||
Asset
Retirement Obligations
|
962
|
936
|
|||||||||||
Employee
Benefits and Pension Obligations
|
339
|
355
|
|||||||||||
Deferred
Gain on Sale and Leaseback - Rockport Plant Unit 2
|
152
|
157
|
|||||||||||
Deferred
Credits and Other
|
809
|
762
|
|||||||||||
TOTAL
|
22,136
|
21,563
|
|||||||||||
TOTAL
LIABILITIES
|
26,697
|
27,023
|
|||||||||||
Cumulative
Preferred Stock Not Subject to Mandatory Redemption
|
61
|
61
|
|||||||||||
Commitments
and Contingencies (Note 5)
|
|||||||||||||
COMMON
SHAREHOLDERS’ EQUITY
|
|||||||||||||
Common
Stock Par Value $6.50:
|
|||||||||||||
2006 2005 | |||||||||||||
Shares
Authorized
|
600,000,000
|
600,000,000
|
|||||||||||
Shares
Issued
|
415,446,501
|
415,218,830
|
|||||||||||
(21,499,992
shares were held in treasury at June 30, 2006 and December
31, 2005)
|
2,700
|
2,699
|
|||||||||||
Paid-in
Capital
|
4,138
|
4,131
|
|||||||||||
Retained
Earnings
|
2,550
|
2,285
|
|||||||||||
Accumulated
Other Comprehensive Income (Loss)
|
38
|
(27
|
)
|
||||||||||
TOTAL
|
9,426
|
9,088
|
|||||||||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
36,184
|
$
|
36,172
|
2006
|
2005
|
||||||
OPERATING
ACTIVITIES
|
|||||||
Net
Income
|
$
|
556
|
$
|
576
|
|||
Less:
Income from Discontinued Operations
|
(6
|
)
|
(4
|
)
|
|||
Income
from Continuing Operations
|
550
|
572
|
|||||
Adjustments
for Noncash Items:
|
|||||||
Depreciation
and Amortization
|
689
|
652
|
|||||
Accretion
of Asset Retirement Obligations
|
30
|
35
|
|||||
Deferred
Income Taxes
|
10
|
(75
|
)
|
||||
Deferred
Investment Tax Credits
|
(14
|
)
|
(15
|
)
|
|||
Carrying
Costs Income
|
(63
|
)
|
(56
|
)
|
|||
Mark-to-Market
of Risk Management Contracts
|
(43
|
)
|
43
|
||||
Amortization
of Nuclear Fuel
|
25
|
27
|
|||||
Deferred
Property Taxes
|
12
|
10
|
|||||
Pension
Contributions to Qualified Plan Trusts
|
-
|
(204
|
)
|
||||
Fuel
Over/Under-Recovery, Net
|
128
|
(45
|
)
|
||||
Gain
on Sales of Assets and Equity Investments, Net
|
(71
|
)
|
(115
|
)
|
|||
Change
in Other Noncurrent Assets
|
109
|
(59
|
)
|
||||
Change
in Other Noncurrent Liabilities
|
(42
|
)
|
(83
|
)
|
|||
Changes
in Certain Components of Working Capital:
|
|||||||
Accounts
Receivable, Net
|
202
|
155
|
|||||
Fuel,
Materials and Supplies
|
(140
|
)
|
(29
|
)
|
|||
Accounts
Payable
|
(17
|
)
|
63
|
||||
Accrued
Taxes
|
90
|
172
|
|||||
Customer
Deposits
|
(189
|
)
|
(34
|
)
|
|||
Other
Current Assets
|
86
|
63
|
|||||
Other
Current Liabilities
|
(215
|
)
|
(95
|
)
|
|||
Net
Cash Flows From Operating Activities
|
1,137
|
982
|
|||||
INVESTING
ACTIVITIES
|
|||||||
Construction
Expenditures
|
(1,625
|
)
|
(1,020
|
)
|
|||
Change
in Other Temporary Cash Investments, Net
|
3
|
(103
|
)
|
||||
Purchases
of Investment Securities
|
(5,647
|
)
|
(2,141
|
)
|
|||
Sales
of Investment Securities
|
5,596
|
2,213
|
|||||
Proceeds
from Sales of Assets
|
123
|
1,500
|
|||||
Other
|
(36
|
)
|
9
|
||||
Net
Cash Flows From (Used For) Investing Activities
|
(1,586
|
)
|
458
|
||||
FINANCING
ACTIVITIES
|
|||||||
Issuance
of Common Stock
|
6
|
28
|
|||||
Repurchase
of Common Stock
|
-
|
(427
|
)
|
||||
Change
in Short-term Debt, Net
|
147
|
(9
|
)
|
||||
Issuance
of Long-term Debt
|
1,081
|
1,660
|
|||||
Retirement
of Long-term Debt
|
(676
|
)
|
(2,040
|
)
|
|||
Dividends
Paid on Common Stock
|
(291
|
)
|
(273
|
)
|
|||
Other
|
30
|
(92
|
)
|
||||
Net
Cash Flows From (Used For) Financing Activities
|
297
|
(1,153
|
)
|
||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
(152
|
)
|
287
|
||||
Cash
and Cash Equivalents at Beginning of Period
|
401
|
320
|
|||||
Cash
and Cash Equivalents at End of Period
|
$
|
249
|
$
|
607
|
|||
SUPPLEMENTARY
INFORMATION
|
|||||||
Cash
Paid for Interest, Net of Capitalized Amounts
|
$
|
316
|
$
|
322
|
|||
Cash
Paid for Income Taxes, Net of Refunds
|
123
|
86
|
|||||
Noncash
Acquisitions Under Capital Leases
|
37
|
22
|
|||||
Construction
Expenditures Included in Accounts Payable at June 30,
|
273
|
123
|
|||||
Acquisition
of Nuclear Fuel in Accounts Payable at June 30,
|
26
|
-
|
|||||
Disposition
of Liabilities Related to Divestitures
|
-
|
22
|
|||||
See
Condensed Notes to Condensed Consolidated Financial
Statements.
|
Common
Stock
|
Accumulated
Other Comprehensive Income (Loss)
|
|||||||||||||||||||
Shares
|
Amount
|
Paid-in
Capital
|
Retained
Earnings
|
Total
|
||||||||||||||||
DECEMBER
31, 2004
|
405
|
$
|
2,632
|
$
|
4,203
|
$
|
2,024
|
$
|
(344
|
)
|
$
|
8,515
|
||||||||
Issuance
of Common Stock
|
1
|
6
|
22
|
28
|
||||||||||||||||
Common
Stock Dividends
|
(273
|
)
|
(273
|
)
|
||||||||||||||||
Repurchase
of Common Stock
|
(427
|
)
|
(427
|
)
|
||||||||||||||||
Other
|
15
|
15
|
||||||||||||||||||
TOTAL
|
7,858
|
|||||||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||||||
Other
Comprehensive Loss, Net of Tax:
|
||||||||||||||||||||
Foreign
Currency Translation Adjustments,
Net
of Tax of $0
|
(1
|
)
|
(1
|
)
|
||||||||||||||||
Cash
Flow Hedges, Net of Tax of $28
|
(51
|
)
|
(51
|
)
|
||||||||||||||||
NET
INCOME
|
576
|
576
|
||||||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
524
|
|||||||||||||||||||
JUNE
30, 2005
|
406
|
$
|
2,638
|
$
|
3,813
|
$
|
2,327
|
$
|
(396
|
)
|
$
|
8,382
|
||||||||
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
|
1.
|
Significant
Accounting Matters
|
|
2.
|
New
Accounting Pronouncements
|
|
3.
|
Rate
Matters
|
|
4.
|
Customer
Choice and Industry Restructuring
|
|
5.
|
Commitments
and Contingencies
|
|
6.
|
Guarantees
|
|
7.
|
Company-wide
Staffing and Budget Review
|
|
8.
|
Dispositions,
Discontinued Operations and Assets Held for Sale
|
|
9.
|
Benefit
Plans
|
|
10.
|
Stock-Based
Compensation
|
|
11.
|
Income
Taxes
|
|
12.
|
Business
Segments
|
|
13.
|
Financing
Activities
|
June
30,
|
December
31,
|
||||||
2006
|
2005
|
||||||
Components
|
(in
millions)
|
||||||
Securities
Available for Sale, Net of Tax
|
$
|
30
|
$
|
19
|
|||
Cash
Flow Hedges, Net of Tax
|
27
|
(27
|
)
|
||||
Minimum
Pension Liability, Net of Tax
|
(19
|
)
|
(19
|
)
|
|||
Total
|
$
|
38
|
$
|
(27
|
)
|
Three
Months
Ended
|
Six
Months
Ended
|
||||||
(in
millions, except per share data)
|
|||||||
Net
Income, as reported
|
$
|
221
|
$
|
576
|
|||
Add:
Stock-based compensation expense included in reported Net Income, net
of related tax effects
|
4
|
6
|
|||||
Deduct:
Stock-based compensation expense determined under fair value based
method for all awards,
net of related
tax effects
|
(4
|
)
|
(6
|
)
|
|||
Pro
Forma Net Income
|
$
|
221
|
$
|
576
|
|||
Earnings
Per Share:
|
|||||||
Basic
- as Reported
|
$
|
0.58
|
$
|
1.48
|
|||
Basic
- Pro Forma (a)
|
$
|
0.58
|
$
|
1.48
|
|||
Diluted
- as Reported
|
$
|
0.58
|
$
|
1.48
|
|||
Diluted
- Pro Forma (a)
|
$
|
0.58
|
$
|
1.48
|
(a)
|
The
pro forma amounts are not representative of the effects on reported
net
income for future years.
|
Three
Months Ended June 30,
|
|||||||||||||
2006
|
2005
|
||||||||||||
(in
millions, except per share data)
|
|||||||||||||
$/share
|
$/share
|
||||||||||||
Earnings
applicable to common stock
|
$
|
175
|
$
|
221
|
|||||||||
Average
number of basic shares outstanding
|
393.7
|
$
|
0.44
|
384.2
|
$
|
0.58
|
|||||||
Average
dilutive effect of:
|
|||||||||||||
Performance
Share Units
|
1.4
|
-
|
0.8
|
-
|
|||||||||
Stock
Options
|
0.2
|
-
|
0.3
|
-
|
|||||||||
Restricted
Stock Units
|
0.1
|
-
|
0.1
|
-
|
|||||||||
Restricted
Shares
|
0.1
|
-
|
-
|
-
|
|||||||||
Average
number of diluted shares outstanding
|
395.5
|
$
|
0.44
|
385.4
|
$
|
0.58
|
Six
Months Ended June 30,
|
|||||||||||||
2006
|
2005
|
||||||||||||
(in
millions, except per share data)
|
|||||||||||||
$/share
|
$/share
|
||||||||||||
Earnings
applicable to common stock
|
$
|
556
|
$
|
576
|
|||||||||
Average
number of basic shares outstanding
|
393.7
|
$
|
1.41
|
388.6
|
$
|
1.48
|
|||||||
Average
dilutive effect of:
|
|||||||||||||
Performance
Share Units
|
1.4
|
-
|
0.8
|
-
|
|||||||||
Stock
Options
|
0.2
|
-
|
0.3
|
-
|
|||||||||
Restricted
Stock Units
|
0.1
|
-
|
0.1
|
-
|
|||||||||
Restricted
Shares
|
0.1
|
-
|
-
|
-
|
|||||||||
Average
number of diluted shares outstanding
|
395.5
|
$
|
1.41
|
389.8
|
$
|
1.48
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
(in
millions)
|
(in
millions)
|
||||||||||||
AEP
Consolidated Purchased Energy:
|
|||||||||||||
Ohio
Valley Electric Corporation (43.47% Owned)
|
$
|
58
|
$
|
48
|
$
|
113
|
$
|
91
|
|||||
Sweeny
Cogeneration Limited Partnership (50% Owned)
|
28
|
31
|
62
|
60
|
|||||||||
AEP
Consolidated Other Revenues - Barging and Other Transportation
Services - Ohio Valley Electric Corporation (43.47%
Owned)
|
8
|
4
|
15
|
8
|
·
|
A
$56 million increase in Expanded Net Energy Cost (ENEC) for fuel
and
purchased power expenses;
|
·
|
A
$23 million special construction surcharge providing recovery of
the costs
of scrubbers and the Wyoming-Jacksons Ferry 765 kV line to
date;
|
·
|
An
$18 million general base rate reduction based on a return on equity
of
10.5%, of which $9 million relates to a reduction in depreciation
expense
which affects cash flows but not earnings; and
|
·
|
A
$17 million credit to refund a portion of deferred prior over-recoveries
of ENEC costs of $51 million, currently recorded in regulatory
liabilities
on the Condensed Consolidated Balance Sheets. Therefore, this item
impacts
cash flows but has no effect on
earnings.
|
(in
millions)
|
||||
Three
Months Ended June 30, 2006
|
$
|
-
|
||
Three
Months Ended June 30, 2005
|
32
|
|||
Six
Months Ended June 30, 2006
|
35
|
|||
Six
Months Ended June 30, 2005
|
57
|
|||
Total
Net SECA Revenues Recognized Through June 2006
|
174
|
·
|
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
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.
|
|
·
|
In
a competing Highway/Byway proposal, a group of LSEs proposed rates
that
would include 500 kV and higher existing facilities and some facilities
at
lower voltages in the Highway rate.
|
|
·
|
Another
proposal uses facilities 200 kV or higher in the Highway rate.
|
|
·
|
In
January 2006, the FERC staff issued testimony and exhibits supporting
a
PJM-wide flat rate or “Postage Stamp” type of rate design that would
include all transmission
facilities.
|
·
|
The
AEP/AP Highway/Byway rate design would result in incremental net
revenues
of approximately $125 million per year for the transmission-owning
AEP
East companies.
|
·
|
The
competing Highway/Byway proposals filed by others would also produce
incremental net revenues to the AEP East transmission-owning companies,
but at a much lower level.
|
·
|
The
staff rate design would produce slightly more net revenue for AEP
than the
original AEP/AP proposal, when fully effective; however, the staff
recommended a phase-in plan that would take an estimated six years
to
complete.
|
·
|
In
Kentucky, KPCo settled a rate case, which provided for the recovery
of its
share of the transmission revenue reduction starting March 30,
2006.
|
·
|
In
Ohio, CSPCo’s and OPCo are recovering the FERC approved OATT which
reflects their share of the full transmission revenue requirement
retroactive to April 1, 2006 under a May 2006 PUCO
order.
|
·
|
In
West Virginia, APCo settled a rate case, which provided for the
recovery
of its share of the T&O/SECA transmission revenue reduction beginning
July 28, 2006.
|
·
|
In
Virginia, APCo filed a request for revised rates, which includes
recovery
of its share of the T&O/SECA transmission revenue reduction starting
October 2, 2006, subject to refund.
|
·
|
In
Indiana, I&M is precluded by a rate cap from raising its rates until
July 1, 2007.
|
(in
millions)
|
||||
Stranded
Generation Plant Costs
|
$
|
974
|
||
Net
Generation-related Regulatory Asset
|
249
|
|||
Excess
Earnings
|
(49
|
)
|
||
Recorded
Net Stranded Generation Plant Costs
|
1,174
|
|||
Recorded
Debt Carrying Costs on Net Stranded Generation Plant Costs
|
375
|
|||
Recorded
Securitizable True-up Regulatory Asset
|
1,549
|
|||
Unrecorded
But Recoverable Equity Carrying Costs
|
217
|
|||
Unrecorded
Estimated July 2006 - August 2006 Debt Carrying Costs
|
17
|
|||
Unrecorded
Excess Earnings, Related Carrying Costs and Other
|
52
|
|||
Settlement
Reduction
|
(77
|
)
|
||
Reduction
for the ADITC and EDFIT Benefits
|
(61
|
)
|
||
Approved
Securitizable Amount
|
1,697
|
|||
Unrecorded
Securitization Bond Issuance Costs
|
23
|
|||
Amount
to be Securitized
|
$
|
1,720
|
(in
millions)
|
||||
Wholesale
Capacity Auction True-up
|
$
|
61
|
||
Carrying
Costs on Wholesale Capacity Auction True-up
|
28
|
|||
Retail
Clawback including Carrying Costs
|
(63
|
)
|
||
Deferred
Over-recovered Fuel Balance
|
(181
|
)
|
||
Retrospective
ADFIT Benefit
|
(70
|
)
|
||
Other
|
(4
|
)
|
||
Recorded
Net Regulatory Liabilities - Other True-up Items
|
(229
|
)
|
||
Unrecorded
Prospective ADFIT Benefit
|
(240
|
)
|
||
Unrecorded
Estimated July 2006 - August 2006 Carrying Costs
|
(6
|
)
|
||
Gross
CTC Refund Proposed
|
(475
|
)
|
||
FERC
Jurisdictional Fuel Refund Deferral
|
16
|
|||
ADITC
and EDFIT Benefit Refund Deferral
|
97
|
|||
Net
CTC Refund Proposed, After Deferrals
|
(362
|
)
|
||
Rate
Case Expense Surcharge
|
7
|
|||
Net
Refund Proposed, After Deferrals and Expenses
|
$
|
(355
|
)
|
Amount
(in
millions)
|
||||
Accrual
at December 31, 2005
|
$
|
12
|
||
Less:
Total Payments
|
8
|
|||
Less:
Accrual Adjustments
|
4
|
|||
Accrual
at June 30, 2006
|
$
|
-
|
Three
Months ended June 30, 2006 and 2005:
|
||||||||||
SEEBOARD
(a)
|
U.K.
Generation (b)
|
Total
|
||||||||
2006
Revenue
|
$
|
-
|
$
|
-
|
$
|
-
|
||||
2006
Pretax Income
|
-
|
4
|
4
|
|||||||
2006
Earnings, Net of Tax
|
-
|
3
|
3
|
|||||||
2005
Revenue
|
$
|
-
|
$
|
-
|
$
|
-
|
||||
2005
Pretax Income
|
-
|
-
|
-
|
|||||||
2005
Earnings, Net of Tax
|
3
|
-
|
3
|
|||||||
Six
Months ended June 30, 2006 and 2005:
|
||||||||||
|
SEEBOARD
(a)
|
U.K.
Generation(c)
|
|
Total
|
||||||
2006
Revenue
|
$
|
-
|
$
|
-
|
$
|
-
|
||||
2006
Pretax Income
|
-
|
9
|
9
|
|||||||
2006
Earnings, Net of Tax
|
-
|
6
|
6
|
|||||||
2005
Revenue (Expense)
|
$
|
-
|
$
|
(8
|
)
|
$
|
(8
|
)
|
||
2005
Pretax Loss
|
-
|
(8
|
)
|
(8
|
)
|
|||||
2005
Earnings (Loss), Net of Tax
|
9
|
(5
|
)
|
4
|
(a)
|
The
amounts relate to purchase price true-up adjustments and tax adjustments
from the sale of SEEBOARD.
|
(b)
|
The
amounts relate to tax adjustments from the sale.
|
(c)
|
The
2006 amounts relate to a release of accrued liabilities for the
London
office lease and tax adjustments from the sale. Amounts in 2005
relate to
purchase price true-up adjustments and tax adjustments from the
sale.
|
June
30,
|
December
31,
|
||||||
Texas
Plants
|
2006
|
2005
|
|||||
Assets:
|
(in
millions)
|
||||||
Other
Current Assets
|
$
|
2
|
$
|
1
|
|||
Property,
Plant and Equipment, Net
|
44
|
43
|
|||||
Total
Assets Held for Sale
|
$
|
46
|
$
|
44
|
Pension
Plans
|
Other
Postretirement
Benefit
Plans
|
||||||||||||
Three
Months Ended June 30, 2006 and 2005:
|
2006
|
2005
|
2006
|
2005
|
|||||||||
(in
millions)
|
|||||||||||||
Service
Cost
|
$
|
24
|
$
|
23
|
$
|
10
|
$
|
10
|
|||||
Interest
Cost
|
57
|
56
|
25
|
26
|
|||||||||
Expected
Return on Plan Assets
|
(83
|
)
|
(78
|
)
|
(23
|
)
|
(22
|
)
|
|||||
Amortization
of Transition Obligation
|
-
|
-
|
7
|
7
|
|||||||||
Amortization
of Net Actuarial Loss
|
19
|
14
|
5
|
7
|
|||||||||
Net
Periodic Benefit Cost
|
$
|
17
|
$
|
15
|
$
|
24
|
$
|
28
|
Pension
Plans
|
Other
Postretirement
Benefit
Plans
|
||||||||||||
Six
Months Ended June 30, 2006 and 2005:
|
2006
|
2005
|
2006
|
2005
|
|||||||||
(in
millions)
|
|||||||||||||
Service
Cost
|
$
|
48
|
$
|
46
|
$
|
20
|
$
|
21
|
|||||
Interest
Cost
|
114
|
112
|
50
|
53
|
|||||||||
Expected
Return on Plan Assets
|
(166
|
)
|
(155
|
)
|
(46
|
)
|
(45
|
)
|
|||||
Amortization
of Transition Obligation
|
-
|
-
|
14
|
14
|
|||||||||
Amortization
of Net Actuarial Loss
|
39
|
27
|
10
|
14
|
|||||||||
Net
Periodic Benefit Cost
|
$
|
35
|
$
|
30
|
$
|
48
|
$
|
57
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Stock
Options
|
(in
thousands)
|
||||||||||||
Fair
Value of Stock Options Vested
|
$
|
-
|
$
|
6
|
$
|
3,665
|
$
|
5,036
|
|||||
Intrinsic
Value of Options Exercised (a)
|
148
|
3,337
|
1,537
|
7,657
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
Options
|
Weighted
Average Exercise Price
|
Options
|
Weighted
Average Exercise Price
|
||||||||||
(in
thousands)
|
|
(in
thousands)
|
|
||||||||||
Outstanding
at beginning of period
|
5,962
|
$
|
34.11
|
6,222
|
$
|
34.16
|
|||||||
Granted
|
-
|
N/A
|
-
|
N/A
|
|||||||||
Exercised/converted
|
(22
|
)
|
27.27
|
(195
|
)
|
28.51
|
|||||||
Expired
|
-
|
N/A
|
-
|
N/A
|
|||||||||
Forfeited
|
(88
|
)
|
37.77
|
(175
|
)
|
43.10
|
|||||||
Outstanding
at June 30, 2006
|
5,852
|
34.08
|
5,852
|
34.08
|
|||||||||
Options
exercisable at June 30, 2006
|
5,587
|
$
|
34.33
|
5,587
|
$
|
34.33
|
2006
Range of Exercise Prices
|
Number
Outstanding
|
Weighted
Average
Remaining
Life
|
Weighted
Average
Exercise
Price
|
Aggregate
Intrinsic Value
|
|||||||||
(in
thousands)
|
(in
years)
|
(in
thousands)
|
|||||||||||
$25.73
- $27.95
|
1,443
|
6.1
|
$
|
27.37
|
$
|
9,924
|
|||||||
$30.76
- $38.65
|
4,039
|
3.5
|
35.44
|
520
|
|||||||||
$43.79
- $49.00
|
370
|
4.9
|
45.43
|
-
|
|||||||||
5,852
|
4.2
|
34.08
|
$
|
10,444
|
2006
Range of Exercise Prices
|
Number
Exercisable
|
Weighted
Average
Remaining
Life
|
Weighted
Average
Exercise
Price
|
Aggregate
Intrinsic Value
|
|||||||||
(in
thousands)
|
(in
years)
|
(in
thousands)
|
|||||||||||
$25.73
- $27.95
|
1,238
|
5.9
|
$
|
27.29
|
$
|
8,621
|
|||||||
$30.76
- $35.63
|
3,979
|
3.4
|
35.50
|
347
|
|||||||||
$43.79
- $49.00
|
370
|
4.9
|
45.43
|
-
|
|||||||||
5,587
|
4.1
|
34.33
|
$
|
8,968
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Performance
Units
|
|||||||||||||
Awarded
Units (in thousands)
|
-
|
-
|
864
|
1,013
|
|||||||||
Unit
Fair Value at Grant Date
|
$
|
N/A
|
$
|
N/A
|
$
|
37.36
|
$
|
34.02
|
|||||
Vesting
Period (years)
|
N/A
|
N/A
|
3
|
3
|
|||||||||
Performance
Units and AEP Career Shares (Reinvested Dividends
Portion)
|
|||||||||||||
Awarded
Units (in thousands)
|
31
|
22
|
61
|
46
|
|||||||||
Weighted
Average Grant Date Fair Value
|
$
|
34.90
|
$
|
35.73
|
$
|
35.10
|
$
|
34.94
|
|||||
Vesting
Period (years) (a)
|
3
|
3
|
3
|
3
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
(in
thousands)
|
|||||||||||||
Cash
payouts for Performance Units
|
$
|
-
|
$
|
-
|
$
|
2,630
|
$
|
-
|
|||||
Cash
payouts for AEP Career Share distributions
|
479
|
463
|
955
|
1,028
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Restricted
Stock Units
|
|||||||||||||
Awarded
Units (in thousands)
|
8
|
99
|
45
|
126
|
|||||||||
Weighted
Average Grant Date Fair Value
|
$
|
34.49
|
$
|
35.55
|
$
|
35.57
|
$
|
35.03
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Restricted
Shares and Restricted Stock Units
|
(in
thousands)
|
||||||||||||
Fair
Value of Restricted Shares and Restricted Stock
Units Vested
|
$
|
609
|
$
|
26
|
$
|
2,889
|
$
|
2,159
|
|||||
Intrinsic
Value of Restricted Shares and Restricted
Stock Units
Vested
|
571
|
30
|
3,515
|
2,608
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
Weighted
Average
|
Weighted
Average
|
||||||||||||
Nonvested
Restricted Shares and Restricted Stock Units
|
Shares/Units
|
Grant
Date
Fair
Value
|
Shares/Units
|
Grant
Date
Fair
Value
|
|||||||||
(in
thousands)
|
(in
thousands)
|
||||||||||||
Nonvested
at beginning of period
|
454
|
$
|
33.06
|
497
|
$
|
32.19
|
|||||||
Granted
|
8
|
34.49
|
45
|
35.57
|
|||||||||
Vested
|
(17
|
)
|
35.36
|
(96
|
)
|
30.04
|
|||||||
Forfeited
|
(15
|
)
|
35.59
|
(16
|
)
|
35.49
|
|||||||
Nonvested
at June 30, 2006
|
430
|
32.91
|
430
|
32.91
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Share-based
Compensation Plans
|
(in
thousands)
|
||||||||||||
Compensation
cost for share-based payment arrangements
|
$
|
1,209
|
$
|
5,352
|
$
|
3,639
|
$
|
8,268
|
|||||
Actual
tax benefit realized
|
424
|
1,873
|
1,274
|
2,894
|
|||||||||
Total
compensation cost capitalized
|
42
|
995
|
620
|
1,396
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Share-based
Compensation Plans
|
(in
thousands)
|
||||||||||||
Cash
received from stock options exercised
|
$
|
609
|
$
|
13,260
|
$
|
5,561
|
$
|
28,413
|
|||||
Actual
tax benefit realized for the tax deductions
from stock options
exercised
|
52
|
1,160
|
538
|
2,675
|
·
|
Generation
of electricity for sale to U.S. retail and wholesale
customers.
|
·
|
Electricity
transmission and distribution in the
U.S.
|
·
|
Gas
pipeline and storage services.
|
·
|
Gas
marketing and risk management activities.
|
·
|
We
disposed of our gas pipeline and storage assets in 2005 with the
sale of
HPL (see “Dispositions” section of Note
8).
|
·
|
International
generation of electricity for sale to wholesale
customers.
|
·
|
Coal
procurement and transportation to our plants.
|
·
|
We
classified UK Operations as Discontinued Operations during 2003
and sold
them in 2004.
|
·
|
Bulk
commodity barging operations, wind farms, IPPs and other energy
supply-related businesses.
|
Investments
|
||||||||||||||||||||||
Utility
Operations
|
Gas
Operations
|
UK
Operations
|
Other
|
All
Other (a)
|
Reconciling
Adjustments
|
Consolidated | ||||||||||||||||
(in
millions)
|
||||||||||||||||||||||
Three
Months Ended
|
||||||||||||||||||||||
June
30, 2006
|
||||||||||||||||||||||
Revenues
from:
|
||||||||||||||||||||||
External
Customers
|
$
|
2,810
|
$
|
(15
|
)
|
$
|
-
|
$ | 141 |
$
|
-
|
$
|
-
|
$
|
2,936
|
|||||||
Other
Operating Segments
|
(11
|
)
|
17
|
-
|
2 |
-
|
(8
|
)
|
-
|
|||||||||||||
Total
Revenues
|
$
|
2,799
|
$
|
2
|
$
|
-
|
$ | 143 |
$
|
-
|
$
|
(8
|
)
|
$
|
2,936
|
|||||||
Income
(Loss) Before Discontinued Operations
|
$
|
160
|
$
|
2
|
$
|
-
|
$ | 13 |
$
|
(3
|
)
|
$
|
-
|
$
|
172
|
|||||||
Discontinued
Operations, Net of Tax
|
-
|
-
|
3
|
- |
-
|
-
|
3
|
|||||||||||||||
Net
Income (Loss)
|
$
|
160
|
$
|
2
|
$
|
3
|
$ | 13 |
$
|
(3
|
)
|
$
|
-
|
$
|
175
|
Investments
|
||||||||||||||||||||||
Utility
Operations
|
Gas
Operations
|
UK
Operations
|
Other
|
All
Other (a)
|
Reconciling
Adjustments
|
Consolidated | ||||||||||||||||
(in
millions)
|
||||||||||||||||||||||
Three
Months Ended
|
||||||||||||||||||||||
June
30, 2005
|
||||||||||||||||||||||
Revenues
from:
|
||||||||||||||||||||||
External
Customers
|
$
|
2,680
|
$
|
19
|
|
$
|
-
|
$ | 120 |
$
|
-
|
$
|
-
|
$
|
2,819
|
|||||||
Other
Operating Segments
|
22
|
|
(17
|
) |
-
|
3 |
-
|
(8
|
)
|
-
|
||||||||||||
Total
Revenues
|
$
|
2,702
|
$
|
2
|
$
|
-
|
$ | 123 |
$
|
-
|
$
|
(8
|
)
|
$
|
2,819
|
|||||||
Income
(Loss) Before Discontinued Operations
|
$
|
247
|
$
|
(2
|
) |
$
|
-
|
$ | (1 | ) |
$
|
(26
|
)
|
$
|
-
|
$
|
218
|
|||||
Discontinued
Operations, Net of Tax
|
-
|
-
|
-
|
3 |
-
|
-
|
3
|
|||||||||||||||
Net
Income (Loss)
|
$
|
247
|
$
|
(2
|
) |
$
|
-
|
$ | 2 |
$
|
(26
|
)
|
$
|
-
|
$
|
221
|
Investments
|
||||||||||||||||||||||
Utility
Operations
|
Gas
Operations
|
UK
Operations
|
Other
|
All
Other (a)
|
Reconciling
Adjustments
|
Consolidated | ||||||||||||||||
(in
millions)
|
||||||||||||||||||||||
Six Months
Ended
|
||||||||||||||||||||||
June
30, 2006
|
||||||||||||||||||||||
Revenues
from:
|
||||||||||||||||||||||
External
Customers
|
$
|
5,797
|
$
|
(33
|
)
|
$
|
-
|
$ | 280 |
$
|
-
|
$
|
-
|
$
|
6,044
|
|||||||
Other
Operating Segments
|
(29
|
)
|
38
|
-
|
5 |
1
|
(15
|
)
|
-
|
|||||||||||||
Total
Revenues
|
$
|
5,768
|
$
|
5
|
$
|
-
|
$ | 285 |
$
|
1
|
$
|
(15
|
)
|
$
|
6,044
|
|||||||
Income
(Loss) Before Discontinued Operations
|
$
|
525
|
$
|
1
|
$
|
-
|
$ | 29 |
$
|
(5
|
)
|
$
|
-
|
$
|
550
|
|||||||
Discontinued
Operations, Net of Tax
|
-
|
-
|
6
|
- |
-
|
-
|
6
|
|||||||||||||||
Net
Income (Loss)
|
$
|
525
|
$
|
1
|
$
|
6
|
$ | 29 |
$
|
(5
|
)
|
$
|
-
|
$
|
556
|
Investments
|
||||||||||||||||||||||
Utility
Operations
|
Gas
Operations
|
UK
Operations
|
Other
|
All
Other (a)
|
Reconciling
Adjustments
|
Consolidated | ||||||||||||||||
(in
millions)
|
||||||||||||||||||||||
Three
Months Ended
|
||||||||||||||||||||||
June
30, 2005
|
||||||||||||||||||||||
Revenues
from:
|
||||||||||||||||||||||
External
Customers
|
$
|
5,285
|
$
|
376
|
|
$
|
-
|
$ | 223 |
$
|
-
|
$
|
-
|
$
|
5,884
|
|||||||
Other
Operating Segments
|
101
|
|
(90
|
) |
-
|
9 |
1
|
(21
|
)
|
-
|
||||||||||||
Total
Revenues
|
$
|
5,386
|
$
|
286
|
$
|
-
|
$ | 232 |
$
|
1
|
$
|
(21
|
)
|
$
|
5,884
|
|||||||
Income
(Loss) Before Discontinued Operations
|
$
|
600
|
$
|
8
|
$
|
-
|
$ | 4 |
$
|
(40
|
)
|
$
|
-
|
$
|
572
|
|||||||
Discontinued
Operations, Net of Tax
|
-
|
-
|
(5
|
) | 9 |
-
|
-
|
4
|
||||||||||||||
Net
Income (Loss)
|
$
|
600
|
$
|
8
|
$
|
(5
|
) | $ | 13 |
$
|
(40
|
)
|
$
|
-
|
$
|
576
|
Investments
|
||||||||||||||||||||||
|
|
Utility
Operations
|
|
Gas
Operations
|
|
UK
Operations
|
|
Other
|
|
All
Other(b)
|
Reconciling
Adjustments (b)
|
Consolidated
|
||||||||||
(in
millions)
|
||||||||||||||||||||||
As
of June 30, 2006
|
||||||||||||||||||||||
Total
Property, Plant and Equipment
|
$
|
39,653
|
$
|
1
|
$
|
-
|
$
|
834
|
$
|
3
|
$
|
-
|
$
|
40,491
|
||||||||
Accumulated
Depreciation and Amortization
|
14,965
|
-
|
-
|
126
|
2
|
-
|
15,093
|
|||||||||||||||
Total
Property, Plant and Equipment - Net
|
$
|
24,688
|
$
|
1
|
$
|
-
|
$
|
708
|
$
|
1
|
$
|
-
|
$
|
25,398
|
||||||||
Total
Assets
|
$
|
34,689
|
$
|
735
|
(c) |
$
|
630
|
(d) |
$
|
577
|
$
|
10,400
|
$
|
(10,847
|
)
|
$
|
36,184
|
|||||
Assets
Held for Sale
|
46
|
-
|
-
|
-
|
-
|
-
|
46
|
Investments
|
||||||||||||||||||||||
|
|
Utility
Operations
|
|
Gas
Operations
|
|
UK
Operations
|
|
Other
|
|
All
Other(b)
|
Reconciling
Adjustments (b)
|
Consolidated
|
||||||||||
(in
millions)
|
||||||||||||||||||||||
As
of December 31, 2005
|
||||||||||||||||||||||
Total
Property, Plant and Equipment
|
$
|
38,283
|
$
|
2
|
$
|
-
|
$
|
833
|
$
|
3
|
$
|
-
|
$
|
39,121
|
||||||||
Accumulated
Depreciation and Amortization
|
14,723
|
1
|
-
|
112
|
1
|
-
|
14,837
|
|||||||||||||||
Total
Property, Plant and Equipment - Net
|
$
|
23,560
|
$
|
1
|
$
|
-
|
$
|
721
|
$
|
2
|
$
|
-
|
$
|
24,284
|
||||||||
Total
Assets
|
$
|
34,339
|
$
|
1,199
|
(e) |
$
|
632
|
(f) |
$
|
509
|
$
|
9,463
|
$
|
(9,970
|
)
|
$
|
36,172
|
|||||
Assets
Held for Sale
|
44
|
-
|
-
|
-
|
-
|
-
|
44
|
(a)
|
All
Other includes the parent company’s interest income and expense, as well
as other nonallocated costs.
|
(b)
|
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 (included in All Other) in
subsidiary companies.
|
(c)
|
Total
Assets of $735 million for the Investments-Gas Operations segment
include
$344 million in affiliated accounts receivable related to the corporate
borrowing program and risk management contracts that are eliminated
in
consolidation. The majority of the remaining $391 million in assets
represents third party risk management contracts, margin deposits,
and
accounts receivable.
|
(d)
|
Total
Assets of $630 million for the Investments-UK Operations segment
include
$614 million in affiliated accounts receivable related mainly to
federal
income taxes that are eliminated in consolidation. The majority
of the
remaining $16 million in assets represents value-added tax
receivables.
|
(e)
|
Total
Assets of $1.2 billion for the Investments-Gas Operations segment
include
$429 million in affiliated accounts receivable related to the corporate
borrowing program and risk management contracts that are eliminated
in
consolidation. The majority of the remaining $770 million in assets
represents third party risk management contracts, margin deposits,
and
accounts receivable.
|
(f)
|
Total
Assets of $632 million for the Investments-UK Operations segment
include
$613 million in affiliated accounts receivable related to federal
income
taxes that are eliminated in consolidation. The majority of the
remaining
$19 million in assets represents cash equivalents and value-added
tax
receivables.
|
June
30,
|
December
31,
|
||||||
Type
of Debt
|
2006
|
2005
|
|||||
(in
millions)
|
|||||||
Commercial
Paper - AEP (a)
|
$
|
144
|
$
|
-
|
|||
Commercial
Paper - JMG (b)
|
5
|
10
|
|||||
Line
of Credit - Sabine (c)
|
10
|
-
|
|||||
$
|
159
|
$
|
10
|
(a)
|
The
interest rate at June 30, 2006 was 5.37%.
|
(b)
|
The
interest rate at June 30, 2006 and December 31, 2005 was 5.47%
and 4.47%,
respectively.
|
(c)
|
The
interest rate at June 30, 2006 was
6.38%.
|
June
30,
|
December
31,
|
||||||
Type
of Debt
|
2006
|
2005
|
|||||
(in
millions)
|
|||||||
Pollution
Control Bonds
|
$
|
2,051
|
$
|
1,935
|
|||
Senior
Unsecured Notes
|
8,677
|
8,226
|
|||||
First
Mortgage Bonds
|
96
|
196
|
|||||
Defeased
First Mortgage Bonds (a)
|
26
|
26
|
|||||
Notes
Payable
|
886
|
904
|
|||||
Securitization
Bonds
|
617
|
648
|
|||||
Notes
Payable To Trust
|
113
|
113
|
|||||
Other
Long-Term Debt (b)
|
244
|
236
|
|||||
Unamortized
Discount (net)
|
(65
|
)
|
(58
|
)
|
|||
Total
Long-term Debt Outstanding
|
12,645
|
12,226
|
|||||
Less
Portion Due Within One Year
|
800
|
1,153
|
|||||
Long-term
Portion
|
$
|
11,845
|
$
|
11,073
|
(a)
|
In
May 2004, we deposited cash and treasury securities with a trustee
to
defease all of TCC’s outstanding First Mortgage Bonds. The defeased TCC
First Mortgage Bonds had a balance of $18 million at both June
30, 2006
and December 31, 2005. Trust fund assets related to this obligation
of $2
million are included in Other Temporary Cash Investments at both
June 30,
2006 and December 31, 2005 and $21 million is included in Other
Noncurrent
Assets in the Condensed Consolidated Balance Sheets at both June
30, 2006
and December 31, 2005. In December 2005, we deposited cash and
treasury
securities with a trustee to defease the remaining TNC outstanding
First
Mortgage Bond. The defeased TNC First Mortgage Bond had a balance
of $8
million at both June 30, 2006 and December 31, 2005. Trust fund
assets
related to this obligation of $9 million and $1 million at June
30, 2006
and December 31, 2005, respectively, are included in Other Temporary
Cash
Investments and $0 and $8 million are included in Other Noncurrent
Assets
in the Condensed Consolidated Balance Sheets at June 30, 2006 and
December
31, 2005, respectively. 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 of $267
million
and $264 million related to this obligation are included in Spent
Nuclear
Fuel and Decommissioning Trusts in the Condensed Consolidated Balance
Sheets at June 30, 2006 and December 31, 2005,
respectively.
|
Company
|
Type
of Debt
|
Principal
Amount
|
Interest
Rate
|
Due
Date
|
||||||
(in
millions)
|
(%)
|
|||||||||
Issuances:
|
||||||||||
APCo
|
Pollution
Control Bonds
|
$
|
50
|
Variable
|
2036
|
|||||
APCo
|
Senior
Unsecured Note
|
250
|
5.55
|
2011
|
||||||
APCo
|
Senior
Unsecured Note
|
250
|
6.375
|
2036
|
||||||
I&M
|
Pollution
Control Bonds
|
50
|
Variable
|
2025
|
||||||
OPCo
|
Pollution
Control Bonds
|
65
|
Variable
|
2036
|
||||||
OPCo
|
Senior
Unsecured Note
|
350
|
6.00
|
2016
|
||||||
SWEPCo
|
Pollution
Control Bonds
|
82
|
Variable
|
2018
|
||||||
Total
Issuances
|
$
|
1,097
|
(a)
|
(a)
|
Amount
indicated on statement of cash flows of $1,081 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:
|
||||||||||
AEP
|
Senior
Unsecured Note
|
$
|
396
|
6.125
|
2006
|
|||||
APCo
|
First
Mortgage Bonds
|
100
|
6.80
|
2006
|
||||||
I&M
|
Pollution
Control Bonds
|
50
|
6.55
|
2025
|
||||||
OPCo
|
Notes
Payable
|
3
|
6.81
|
2008
|
||||||
OPCo
|
Notes
Payable
|
3
|
6.27
|
2009
|
||||||
SWEPCo
|
Notes
Payable
|
3
|
4.47
|
2011
|
||||||
SWEPCo
|
Notes
Payable
|
1
|
Variable
|
2008
|
||||||
SWEPCo
|
Pollution
Control Bonds
|
82
|
6.10
|
2018
|
||||||
TCC
|
Securitization
Bonds
|
31
|
5.01
|
2010
|
||||||
Non-Registrant:
|
||||||||||
AEP
Subsidiaries
|
Notes
Payable
|
3
|
Variable
|
2017
|
||||||
CSW
Energy
|
Notes
Payable
|
4
|
5.88
|
2011
|
||||||
Total
Retirements and
Principal
Payments
|
$
|
676
|
Second
Quarter of 2005
|
$
|
2.1
|
|||||
Change
in Gross Margin:
|
|||||||
Wholesale
Sales
|
0.3
|
||||||
Changes
in Operating Expenses and Other:
|
|||||||
Other
Operation and Maintenance
|
0.3
|
||||||
Interest
Expense
|
(0.1
|
)
|
|||||
Total
Change in Operating Expenses and Other
|
0.2
|
||||||
Income
Tax Expense
|
(0.4
|
)
|
|||||
Second
Quarter of 2006
|
$
|
2.2
|
Six
Months Ended June 30, 2005
|
$
|
4.6
|
|||||
Change
in Gross Margin:
|
|||||||
Wholesale
Sales
|
3.0
|
||||||
Changes
in Operating Expenses and Other:
|
|||||||
Other
Operation and Maintenance
|
(1.4
|
)
|
|||||
Interest
Expense
|
(0.2
|
)
|
|||||
Total
Change in Operating Expenses and Other
|
(1.6
|
)
|
|||||
Income
Tax Expense
|
(0.9
|
)
|
|||||
Six
Months Ended June 30, 2006
|
$
|
5.1
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
||||
OPERATING
REVENUES
|
$
|
77,195
|
$
|
65,082
|
$
|
155,346
|
$
|
131,628
|
|||||
EXPENSES
|
|||||||||||||
Fuel
for Electric Generation
|
45,087
|
33,233
|
89,048
|
68,368
|
|||||||||
Rent
- Rockport Plant Unit 2
|
17,071
|
17,071
|
34,142
|
34,142
|
|||||||||
Other
Operation
|
3,122
|
3,126
|
6,217
|
5,573
|
|||||||||
Maintenance
|
1,930
|
2,272
|
4,716
|
3,990
|
|||||||||
Depreciation
and Amortization
|
5,959
|
5,989
|
11,907
|
11,945
|
|||||||||
Taxes
Other Than Income Taxes
|
1,028
|
1,051
|
2,098
|
2,075
|
|||||||||
TOTAL
|
74,197
|
62,742
|
148,128
|
126,093
|
|||||||||
OPERATING
INCOME
|
2,998
|
2,340
|
7,218
|
5,535
|
|||||||||
Other
Income (Expense):
|
|||||||||||||
Interest
Income
|
-
|
24
|
-
|
24
|
|||||||||
Allowance
for Equity Funds Used During Construction
|
24
|
60
|
24
|
60
|
|||||||||
Interest
Expense
|
(641
|
)
|
(562
|
)
|
(1,363
|
)
|
(1,196
|
)
|
|||||
INCOME
BEFORE INCOME TAXES
|
2,381
|
1,862
|
5,879
|
4,423
|
|||||||||
Income
Tax Expense (Credit)
|
161
|
(211
|
)
|
731
|
(166
|
)
|
|||||||
NET
INCOME
|
$
|
2,220
|
$
|
2,073
|
$
|
5,148
|
$
|
4,589
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
2006
|
|
2005
|
|
2006
|
|
2005
|
|||||||
BALANCE
AT BEGINNING OF PERIOD
|
$
|
26,968
|
$
|
25,813
|
$
|
26,038
|
$
|
24,237
|
|||||
Net
Income
|
2,220
|
2,073
|
5,148
|
4,589
|
|||||||||
Cash
Dividends Declared
|
2,012
|
939
|
4,010
|
1,879
|
|||||||||
BALANCE
AT END OF PERIOD
|
$
|
27,176
|
$
|
26,947
|
$
|
27,176
|
$
|
26,947
|
The
common stock of AEGCo is wholly-owned by AEP.
|
See
Condensed Notes to Condensed Financial Statements of Registrant
Subsidiaries.
|
2006
|
|
|
2005
|
||||
CURRENT
ASSETS
|
|||||||
Accounts
Receivable - Affiliated Companies
|
$
|
26,930
|
$
|
29,671
|
|||
Fuel
|
18,513
|
14,897
|
|||||
Materials
and Supplies
|
7,614
|
7,017
|
|||||
Accrued
Tax Benefits
|
1,311
|
2,074
|
|||||
Prepayments
and Other
|
88
|
9
|
|||||
TOTAL
|
54,456
|
53,668
|
|||||
PROPERTY,
PLANT AND EQUIPMENT
|
|||||||
Electric
- Production
|
689,407
|
684,721
|
|||||
Other
|
2,342
|
2,369
|
|||||
Construction
Work in Progress
|
9,759
|
12,252
|
|||||
Total
|
701,508
|
699,342
|
|||||
Accumulated
Depreciation and Amortization
|
393,630
|
382,925
|
|||||
TOTAL
- NET
|
307,878
|
316,417
|
|||||
Noncurrent
Assets
|
8,409
|
6,618
|
|||||
TOTAL
ASSETS
|
$
|
370,743
|
$
|
376,703
|
2006
|
|
|
2005
|
|
|||
CURRENT
LIABILITIES
|
(in
thousands)
|
||||||
Advances
from Affiliates
|
$
|
36,989
|
$
|
35,131
|
|||
Accounts
Payable:
|
|||||||
General
|
494
|
926
|
|||||
Affiliated
Companies
|
17,351
|
22,161
|
|||||
Long-term
Debt Due Within One Year
|
-
|
44,828
|
|||||
Accrued
Taxes
|
5,486
|
3,055
|
|||||
Accrued
Rent - Rockport Plant Unit 2
|
4,963
|
4,963
|
|||||
Other
|
1,319
|
1,228
|
|||||
TOTAL
|
66,602
|
112,292
|
|||||
NONCURRENT
LIABILITIES
|
|||||||
Long-term
Debt
|
44,833
|
-
|
|||||
Deferred
Income Taxes
|
21,765
|
23,617
|
|||||
Asset
Retirement Obligations
|
1,400
|
1,370
|
|||||
Regulatory
Liabilities and Deferred Investment Tax Credits
|
81,154
|
82,689
|
|||||
Deferred
Gain on Sale and Leaseback - Rockport Plant Unit 2
|
91,548
|
94,333
|
|||||
Obligations
Under Capital Leases
|
11,831
|
11,930
|
|||||
TOTAL
|
252,531
|
213,939
|
|||||
TOTAL
LIABILITIES
|
319,133
|
326,231
|
|||||
Commitments
and Contingencies (Note 5)
|
|||||||
COMMON
SHAREHOLDER’S EQUITY
|
|||||||
Common
Stock - $1,000 Par Value Per Share
Authorized
and Outstanding - 1,000 Shares
|
1,000
|
1,000
|
|||||
Paid-in
Capital
|
23,434
|
23,434
|
|||||
Retained
Earnings
|
27,176
|
26,038
|
|||||
TOTAL
|
51,610
|
50,472
|
|||||
TOTAL
LIABILITIES AND SHAREHOLDER’S EQUITY
|
$
|
370,743
|
$
|
376,703
|
2006
|
|
|
2005
|
||||
OPERATING
ACTIVITIES
|
|||||||
Net
Income
|
$
|
5,148
|
$
|
4,589
|
|||
Adjustments
for Noncash Items:
|
|||||||
Depreciation
and Amortization
|
11,907
|
11,945
|
|||||
Deferred
Income Taxes
|
(2,298
|
)
|
(2,379
|
)
|
|||
Deferred
Investment Tax Credits
|
(1,655
|
)
|
(1,668
|
)
|
|||
Amortization
of Deferred Gain on Sale and Leaseback
- Rockport Plant Unit 2
|
(2,785
|
)
|
(2,785
|
)
|
|||
Deferred
Property Taxes
|
(1,813
|
)
|
(1,950
|
)
|
|||
Changes
in Other Noncurrent Assets
|
(456
|
)
|
(1,270
|
)
|
|||
Changes
in Other Noncurrent Liabilities
|
579
|
1,648
|
|||||
Changes
in Components of Working Capital:
|
|||||||
Accounts
Receivable
|
2,741
|
(1,081
|
)
|
||||
Fuel,
Materials and Supplies
|
(4,213
|
)
|
4,265
|
||||
Accounts
Payable
|
(5,242
|
)
|
(2,405
|
)
|
|||
Accrued
Taxes, Net
|
3,194
|
(2,042
|
)
|
||||
Other
Current Assets
|
(79
|
)
|
(26
|
)
|
|||
Other
Current Liabilities
|
91
|
354
|
|||||
Net
Cash Flows From Operating Activities
|
5,119
|
7,195
|
|||||
INVESTING
ACTIVITIES
|
|||||||
Construction
Expenditures
|
(2,816
|
)
|
(2,882
|
)
|
|||
FINANCING
ACTIVITIES
|
|||||||
Change
in Advances from Affiliates, Net
|
1,858
|
(2,294
|
)
|
||||
Principal
Payments for Capital Lease Obligations
|
(151
|
)
|
(140
|
)
|
|||
Dividends
Paid
|
(4,010
|
)
|
(1,879
|
)
|
|||
Net
Cash Flows Used For Financing Activities
|
(2,303
|
)
|
(4,313
|
)
|
|||
Net
Change in Cash and Cash Equivalents
|
-
|
-
|
|||||
Cash
and Cash Equivalents at Beginning of Period
|
-
|
-
|
|||||
Cash
and Cash Equivalents at End of Period
|
$
|
-
|
$
|
-
|
|||
SUPPLEMENTARY
INFORMATION
|
|||||||
Cash
Paid for Interest, Net of Capitalized Amounts
|
$
|
1,230
|
$
|
1,063
|
|||
Cash
Paid for Income Taxes, Net of Refunds
|
3,624
|
8,080
|
|||||
Noncash
Acquisitions Under Capital Leases
|
74
|
26
|
Footnote
Reference
|
|
Significant
Accounting Matters
|
Note
1
|
New
Accounting Pronouncements
|
Note
2
|
Commitments
and Contingencies
|
Note
5
|
Guarantees
|
Note
6
|
Company-wide
Staffing and Budget Review
|
Note
7
|
Business
Segments
|
Note
11
|
Financing
Activities
|
Note
12
|
Second
Quarter of 2005
|
$
|
28
|
|||||
Changes
in Gross Margin:
|
|||||||
Texas
Supply
|
(30
|
)
|
|||||
Texas
Wires
|
8
|
||||||
Off-system
Sales
|
(2
|
)
|
|||||
Transmission
Revenues
|
(4
|
)
|
|||||
Other
|
(1
|
)
|
|||||
Total
Change in Gross Margin
|
(29
|
)
|
|||||
Changes
in Operating Expenses and Other:
|
|||||||
Other
Operation and Maintenance
|
17
|
||||||
Depreciation
and Amortization
|
(2
|
)
|
|||||
Taxes
Other Than Income Taxes
|
4
|
||||||
Other
Income (Expense), Net
|
(1
|
)
|
|||||
Total
Change in Operating Expenses and Other
|
18
|
||||||
Second
Quarter of 2006
|
$
|
17
|
·
|
Texas
Supply margins decreased $30 million primarily due to the sale
of STP,
which resulted in lower nonaffiliated sales of $38 million, and
a $5
million provision for refund primarily due to the fuel reconciliation
adjustment in 2005. These decreases were partially offset by lower
fuel
and purchased power expenses of $12 million.
|
·
|
Texas
Wires revenues increased $8 million primarily due to an increase
in sales
volumes resulting mainly from a 23% increase in cooling degree
days.
|
·
|
Margins
from Off-system Sales decreased $2 million primarily due to lower
optimization activities.
|
·
|
Transmission
Revenues decreased $4 million primarily due to lower ERCOT transmission
rates and reduced affiliated transmission fees resulting from the
elimination of the affiliated OATT.
|
·
|
Other
Operation and Maintenance expenses decreased $17 million primarily
due to
a $7 million decrease in power plant operations, a $4 million decrease
in
plant maintenance and the absence of $3 million in accretion expense
all
related to the sale of the STP. Customer service and administrative
and
general expenses decreased $6 million partially offset by increased
transmission-related expense of $3 million.
|
·
|
Taxes
Other than Income Taxes decreased $4 million due to the favorable
settlement of a state use tax audit in
2006.
|
Six
Months Ended June 30, 2005
|
$
|
30
|
|||||
Changes
in Gross Margin:
|
|||||||
Texas
Supply
|
(74
|
)
|
|||||
Texas
Wires
|
11
|
||||||
Off-system
Sales
|
(2
|
)
|
|||||
Transmission
Revenues
|
(9
|
)
|
|||||
Other
|
(3
|
)
|
|||||
Total
Change in Gross Margin
|
(77
|
)
|
|||||
Changes
in Operating Expenses and Other:
|
|||||||
Other
Operation and Maintenance
|
48
|
||||||
Depreciation
and Amortization
|
(6
|
)
|
|||||
Taxes
Other Than Income Taxes
|
6
|
||||||
Interest
Income and Expense, Net
|
(3
|
)
|
|||||
Carrying
Costs on Stranded Cost Recovery
|
25
|
||||||
Total
Change in Operating Expenses and Other
|
70
|
||||||
Income
Tax Expense
|
(2
|
)
|
|||||
Six
Months Ended June 30, 2006
|
$
|
21
|
·
|
Texas
Supply margins decreased $74 million primarily due to the sale
of STP
which resulted in lower nonaffiliated sales of $98 million and
a $6
million provision for refund primarily due to the fuel reconciliation
adjustment in 2005. These decreases were partially offset by lower
fuel
and purchased power expenses of $30 million.
|
·
|
Texas
Wires revenues increased $11 million primarily due to an increase
in sales
volumes resulting mainly from a 28% increase in cooling degree
days.
|
·
|
Margins
from Off-system Sales decreased $2 million primarily due to lower
optimization activities.
|
·
|
Transmission
Revenues decreased $9 million primarily due to lower ERCOT transmission
rates and reduced affiliated transmission fees resulting from the
elimination of the affiliated OATT.
|
·
|
Other
revenues decreased $3 million primarily due to lower third party
construction project revenues related to work performed for the
Lower
Colorado River Authority.
|
·
|
Other
Operation and Maintenance expenses decreased $48 million primarily
due to
a $14 million decrease in power plant operations, a $13 million
decrease
in plant maintenance and the absence of $8 million in accretion
expense
all related to the sale of STP. An additional $5 million decrease
resulted
from lower expenses related to construction activities performed
for third
parties, primarily the Lower Colorado River Authority.
|
·
|
Depreciation
and Amortization expense increased $6 million primarily related
to the
refund and amortization of excess earnings credits in 2005 partially
offset by the recovery and amortization of securitized
assets.
|
·
|
Taxes
Other Than Income Taxes decreased $6 million primarily due to lower
property-related taxes as a result of the sale of STP in 2005 and
the
favorable settlement of a state use tax audit in 2006.
|
·
|
Interest
Income and Expense, Net changed unfavorably $3 million primarily
due to
higher interest on long-term debt and interest related to the Texas
competition transition charge liability (See “Texas Restructuring” section
of Note 4) partially offset by lower short-term interest
expense.
|
·
|
Carrying
Costs on Stranded Cost Recovery increased $25 million primarily
due to a
$27 million negative adjustment related to prior years, recorded
in the
first quarter of 2005.
|
Moody’s
|
S&P
|
Fitch
|
|||
First
Mortgage Bonds
|
Baa1
|
BBB
|
A
|
||
Senior
Unsecured Debt
|
Baa2
|
BBB
|
A-
|
2006
|
|
|
2005
|
||||
(in
thousands)
|
|||||||
Cash
and Cash Equivalents at Beginning of Period
|
$
|
-
|
$
|
26
|
|||
Net
Cash Flows From (Used For):
|
|||||||
Operating
Activities
|
81,341
|
(105,434
|
)
|
||||
Investing
Activities
|
(121,052
|
)
|
140,683
|
||||
Financing
Activities
|
39,711
|
(33,181
|
)
|
||||
Net
Increase in Cash and Cash Equivalents
|
-
|
2,068
|
|||||
Cash
and Cash Equivalents at End of Period
|
$
|
-
|
$
|
2,094
|
Principal
Amount
|
Interest
|
Due
|
|||||
Type
of Debt
|
Rate
|
Date
|
|||||
(in
thousands)
|
(%)
|
||||||
Notes
Payable-Affiliated
|
$
|
125,000
|
5.14
|
2007
|
Principal
Amount
|
Interest
|
Due
|
|||||
Type
of Debt
|
Rate
|
Date
|
|||||
(in
thousands)
|
(%)
|
||||||
Securitization
Bonds
|
$
|
30,641
|
5.01
|
2010
|
(in
millions)
|
||||
Stranded
Generation Plant Costs
|
$
|
974
|
||
Net
Generation-related Regulatory Asset
|
249
|
|||
Excess
Earnings
|
(49
|
)
|
||
Recorded
Net Stranded Generation Plant Costs
|
1,174
|
|||
Recorded
Debt Carrying Costs on Net Stranded Generation Plant Costs
|
375
|
|||
Recorded
Securitizable True-up Regulatory Asset
|
1,549
|
|||
Unrecorded
But Recoverable Equity Carrying Costs
|
217
|
|||
Unrecorded
Estimated July 2006 - August 2006 Debt Carrying Costs
|
17
|
|||
Unrecorded
Excess Earnings, Related Carrying Costs and Other
|
52
|
|||
Settlement
Reduction
|
(77
|
)
|
||
Reduction
for ADITC and EDFIT Benefits
|
(61
|
)
|
||
Approved
Securitizable Amount
|
1,697
|
|||
Unrecorded
Securitization Issuance Costs
|
23
|
|||
Amount
to be Securitized
|
$
|
1,720
|
(in
millions)
|
||||
Wholesale
Capacity Auction True-up
|
$
|
61
|
||
Carrying
Costs on Wholesale Capacity Auction True-up
|
28
|
|||
Retail
Clawback including Carrying Costs
|
(63
|
)
|
||
Deferred
Over-recovered Fuel Balance
|
(181
|
)
|
||
Retrospective
ADFIT Benefit
|
(70
|
)
|
||
Other
|
(4
|
)
|
||
Recorded
Net Regulatory Liabilities - Other True-up Items
|
(229
|
)
|
||
Unrecorded
Prospective ADFIT Benefit
|
(240
|
)
|
||
Unrecorded
Estimated July 2006 - August 2006 Carrying Costs
|
(6
|
)
|
||
Gross
CTC Refund
|
(475
|
)
|
||
FERC
Jurisdictional Fuel Refund Deferral
|
16
|
|||
ADITC
and EDFIT Benefit Refund Deferral
|
97
|
|||
Net
CTC Refund Proposed, After Deferrals
|
(362
|
)
|
||
Rate
Case Expense Surcharge
|
7
|
|||
Net
Refund Proposed, After Deferrals and Expenses
|
$
|
(355
|
)
|
(in
millions)
|
||||
ADITC
and EDFIT Benefits Reducing Securitization
|
$
|
97
|
||
ADFIT
Benefit Applied to Reduce 2002 Securitization of Regulatory Assets
|
(64
|
)
|
||
Securitization
Settlement
|
(77
|
)
|
||
Unrecorded
Prospective ADFIT Benefit Increasing the CTC Refund
|
(240
|
)
|
||
Unrecorded
Equity Carrying Costs Recognized as Collected
|
217
|
|||
Future
Carrying Cost Payable on Proposed CTC Refund
|
(113
|
)
|
||
Deferred
Fuel - Federal Jurisdictional Issue
|
16
|
|||
Net
Adverse Earnings Impact Over 14 Years
|
$
|
(164
|
)
|
Total
MTM Risk Management Contract Net Assets at December 31,
2005
|
$
|
5,426
|
||
(Gain)
Loss from Contracts Realized/Settled During the Period and Entered
in a
Prior Period
|
(1,362
|
)
|
||
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
|
-
|
|||
Changes
in Fair Value Due to Valuation Methodology Changes on Forward
Contracts
|
-
|
|||
Changes
in Fair Value Due to Market Fluctuations During the Period
(b)
|
(3,681
|
)
|
||
Changes
Due to SIA and CSW Operating Agreement (c)
|
(383
|
)
|
||
Changes
in Fair Value Allocated to Regulated Jurisdictions (d)
|
-
|
|||
Total
MTM Risk Management Contract Net Assets
|
-
|
|||
Net
Cash Flow Hedge Contracts
|
-
|
|||
Total
MTM Risk Management Contract Net Assets at June 30,
2006
|
$
|
-
|
(a)
|
Most
of the fair value comes from longer term fixed price contracts
with
customers that seek 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)
|
See
“Allocating Agreement between AEP East companies and AEP West companies”
section of this Management’s Financial Discussion and
Analysis.
|
(d)
|
“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.
|
Power
|
||||
Beginning
Balance in AOCI December 31, 2005
|
$
|
(224
|
)
|
|
Changes
in Fair Value
|
-
|
|||
Impact
Due to Changes in SIA (a)
|
218
|
|||
Reclassifications
from AOCI to Net Income for Cash Flow Hedges Settled
|
6
|
|||
Ending
Balance in AOCI June 30, 2006
|
$
|
-
|
(a)
|
See
“Allocating Agreement between AEP East companies and AEP West companies”
section of this Management’s Financial Discussion and
Analysis.
|
Six
Months Ended
June
30, 2006
|
Twelve
Months Ended
December
31, 2005
|
||||||||||||||||
(in
thousands)
|
(in
thousands)
|
||||||||||||||||
End
|
High
|
Average
|
Low
|
End
|
High
|
Average
|
Low
|
||||||||||
$-
|
$11
|
$3
|
$-
|
$111
|
$184
|
$88
|
$32
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
||||
REVENUES
|
|||||||||||||
Electric
Generation, Transmission and Distribution
|
$
|
149,688
|
$
|
184,743
|
$
|
272,899
|
$
|
366,890
|
|||||
Sales
to AEP Affiliates
|
1,546
|
5,302
|
3,144
|
10,266
|
|||||||||
Other
- Nonaffiliated
|
10,255
|
12,281
|
20,734
|
26,527
|
|||||||||
TOTAL
|
161,489
|
202,326
|
296,777
|
403,683
|
|||||||||
EXPENSES
|
|||||||||||||
Fuel
and Other Consumables for Electric Generation
|
996
|
4,034
|
2,722
|
10,132
|
|||||||||
Purchased
Electricity for Resale
|
1,152
|
9,996
|
2,832
|
25,366
|
|||||||||
Other
Operation
|
63,257
|
76,584
|
122,184
|
157,333
|
|||||||||
Maintenance
|
8,787
|
12,433
|
16,576
|
29,472
|
|||||||||
Depreciation
and Amortization
|
37,215
|
35,434
|
70,550
|
64,720
|
|||||||||
Taxes
Other Than Income Taxes
|
16,671
|
20,923
|
37,034
|
43,454
|
|||||||||
TOTAL
|
128,078
|
159,404
|
251,898
|
330,477
|
|||||||||
OPERATING
INCOME
|
33,411
|
42,922
|
44,879
|
73,206
|
|||||||||
Other
Income (Expense):
|
|||||||||||||
Interest
Income
|
527
|
5,929
|
1,032
|
7,427
|
|||||||||
Carrying
Costs Income
|
20,413
|
19,938
|
39,836
|
14,797
|
|||||||||
Allowance
for Equity Funds Used During Construction
|
631
|
149
|
1,004
|
700
|
|||||||||
Interest
Expense
|
(29,882
|
)
|
(32,642
|
)
|
(56,655
|
)
|
(59,721
|
)
|
|||||
INCOME
BEFORE INCOME TAXES
|
25,100
|
36,296
|
30,096
|
36,409
|
|||||||||
Income
Tax Expense
|
8,125
|
7,928
|
9,348
|
6,904
|
|||||||||
NET
INCOME
|
16,975
|
28,368
|
20,748
|
29,505
|
|||||||||
Preferred
Stock Dividend Requirements
|
61
|
61
|
121
|
121
|
|||||||||
EARNINGS
APPLICABLE TO COMMON STOCK
|
$
|
16,914
|
$
|
28,307
|
$
|
20,627
|
$
|
29,384
|
|
Common
Stock
|
|
|
Paid-in
Capital
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other Comprehensive Income (Loss)
|
|
|
Total
|
|||
DECEMBER
31, 2004
|
$
|
55,292
|
$
|
132,606
|
$
|
1,084,904
|
$
|
(4,159
|
)
|
$
|
1,268,643
|
|||||
Common
Stock Dividends
|
(150,000
|
)
|
(150,000
|
)
|
||||||||||||
Preferred
Stock Dividends
|
(121
|
)
|
(121
|
)
|
||||||||||||
TOTAL
|
1,118,522
|
|||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||
Other
Comprehensive Loss, Net of Taxes:
|
||||||||||||||||
Cash
Flow Hedges, Net of Tax of $546
|
(1,014
|
)
|
(1,014
|
)
|
||||||||||||
NET
INCOME
|
29,505
|
29,505
|
||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
28,491
|
|||||||||||||||
JUNE
30, 2005
|
$
|
55,292
|
$
|
132,606
|
$
|
964,288
|
$
|
(5,173
|
)
|
$
|
1,147,013
|
|||||
DECEMBER
31, 2005
|
$
|
55,292
|
$
|
132,606
|
$
|
760,884
|
$
|
(1,152
|
)
|
$
|
947,630
|
|||||
Preferred
Stock Dividends
|
(121
|
)
|
(121
|
)
|
||||||||||||
TOTAL
|
947,509
|
|||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||
Other
Comprehensive Income,
Net
of Taxes:
|
||||||||||||||||
Cash
Flow Hedges, Net of Tax of $121
|
224
|
224
|
||||||||||||||
NET
INCOME
|
20,748
|
20,748
|
||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
20,972
|
|||||||||||||||
JUNE
30, 2006
|
$
|
55,292
|
$
|
132,606
|
$
|
781,511
|
$
|
(928
|
)
|
$
|
968,481
|
2006
|
|
|
2005
|
||||
CURRENT
ASSETS
|
|||||||
Cash
and Cash Equivalents
|
$
|
-
|
$
|
-
|
|||
Other
Cash Deposits
|
57,456
|
66,153
|
|||||
Accounts
Receivable:
|
|||||||
Customers
|
64,155
|
209,957
|
|||||
Affiliated
Companies
|
4,002
|
23,486
|
|||||
Accrued
Unbilled Revenues
|
26,481
|
25,606
|
|||||
Allowance
for Uncollectible Accounts
|
(185
|
)
|
(143
|
)
|
|||
Total Accounts Receivable
|
94,453
|
258,906
|
|||||
Unbilled
Construction Costs
|
13,177
|
19,440
|
|||||
Materials
and Supplies
|
20,951
|
13,897
|
|||||
Risk
Management Assets
|
-
|
14,311
|
|||||
Prepayments
and Other
|
6,822
|
5,231
|
|||||
TOTAL
|
192,859
|
377,938
|
|||||
PROPERTY,
PLANT AND EQUIPMENT
|
|||||||
Electric:
|
|||||||
Transmission
|
892,979
|
817,351
|
|||||
Distribution
|
1,543,035
|
1,476,683
|
|||||
Other
|
229,915
|
233,361
|
|||||
Construction
Work in Progress
|
97,407
|
129,800
|
|||||
Total
|
2,763,336
|
2,657,195
|
|||||
Accumulated
Depreciation and Amortization
|
627,669
|
636,078
|
|||||
TOTAL
- NET
|
2,135,667
|
2,021,117
|
|||||
OTHER
NONCURRENT ASSETS
|
|||||||
Regulatory
Assets
|
1,688,536
|
1,688,787
|
|||||
Securitized
Transition Assets
|
572,157
|
593,401
|
|||||
Long-term
Risk Management Assets
|
-
|
11,609
|
|||||
Employee
Benefits and Pension Assets
|
113,299
|
114,733
|
|||||
Deferred
Charges and Other
|
67,292
|
53,011
|
|||||
TOTAL
|
2,441,284
|
2,461,541
|
|||||
Assets
Held for Sale - Texas Generation Plants
|
45,608
|
44,316
|
|||||
TOTAL
ASSETS
|
$
|
4,815,418
|
$
|
4,904,912
|
2006
|
|
|
2005
|
||||
CURRENT
LIABILITIES
|
(in
thousands)
|
||||||
Advances
from Affiliates
|
$
|
27,926
|
$
|
82,080
|
|||
Accounts
Payable:
|
|||||||
General
|
32,661
|
82,666
|
|||||
Affiliated
Companies
|
16,960
|
65,574
|
|||||
Long-term
Debt Due Within One Year - Nonaffiliated
|
154,384
|
152,900
|
|||||
Risk
Management Liabilities
|
-
|
13,024
|
|||||
Accrued
Taxes
|
50,221
|
54,566
|
|||||
Accrued
Interest
|
31,767
|
32,497
|
|||||
Other
|
26,606
|
45,927
|
|||||
TOTAL
|
340,525
|
529,234
|
|||||
NONCURRENT
LIABILITIES
|
|||||||
Long-term
Debt - Nonaffiliated
|
1,518,580
|
1,550,596
|
|||||
Long-term
Debt - Affiliated
|
275,000
|
150,000
|
|||||
Long-term
Risk Management Liabilities
|
-
|
7,857
|
|||||
Deferred
Income Taxes
|
1,014,520
|
1,048,372
|
|||||
Regulatory
Liabilities and Deferred Investment Tax Credits
|
674,269
|
652,143
|
|||||
Deferred
Credits and Other
|
18,104
|
13,140
|
|||||
TOTAL
|
3,500,473
|
3,422,108
|
|||||
TOTAL
LIABILITIES
|
3,840,998
|
3,951,342
|
|||||
Cumulative
Preferred Stock Not Subject to Mandatory Redemption
|
5,939
|
5,940
|
|||||
Commitments
and Contingencies (Note 5)
|
|||||||
COMMON
SHAREHOLDER’S EQUITY
|
|||||||
Common
Stock - $25 Par Value Per Share:
|
|||||||
Authorized
- 12,000,000 Shares
|
|||||||
Outstanding
- 2,211,678 Shares
|
55,292
|
55,292
|
|||||
Paid-in
Capital
|
132,606
|
132,606
|
|||||
Retained
Earnings
|
781,511
|
760,884
|
|||||
Accumulated
Other Comprehensive Income (Loss)
|
(928
|
)
|
(1,152
|
)
|
|||
TOTAL
|
968,481
|
947,630
|
|||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
4,815,418
|
$
|
4,904,912
|
2006
|
|
|
2005
|
||||
OPERATING
ACTIVITIES
|
|||||||
Net
Income
|
$
|
20,748
|
$
|
29,505
|
|||
Adjustments
for Noncash Items:
|
|||||||
Depreciation
and Amortization
|
70,550
|
64,720
|
|||||
Accretion
of Asset Retirement Obligations
|
37
|
7,549
|
|||||
Deferred
Income Taxes
|
6,095
|
(83,369
|
)
|
||||
Carrying
Costs on Stranded Cost Recovery
|
(39,836
|
)
|
(14,797
|
)
|
|||
Mark-to-Market
of Risk Management Contracts
|
5,426
|
7,085
|
|||||
Over/Under
Fuel Recovery
|
3,908
|
(2,400
|
)
|
||||
Deferred
Property Taxes
|
(16,592
|
)
|
(15,450
|
)
|
|||
Change
in Other Noncurrent Assets
|
21,686
|
(1,908
|
)
|
||||
Change
in Other Noncurrent Liabilities
|
(25,338
|
)
|
9
|
||||
Changes
in Components of Working Capital:
|
|||||||
Accounts
Receivable, Net
|
164,453
|
28,976
|
|||||
Fuel,
Materials and Supplies
|
(7,652
|
)
|
(969
|
)
|
|||
Accounts
Payable
|
(102,422
|
)
|
(45,594
|
)
|
|||
Accrued
Taxes, Net
|
(9,596
|
)
|
(69,046
|
)
|
|||
Customer
Deposits
|
(6,876
|
)
|
(733
|
)
|
|||
Accrued
Interest
|
(730
|
)
|
(2,555
|
)
|
|||
Other
Current Assets
|
9,924
|
(8,279
|
)
|
||||
Other
Current Liabilities
|
(12,444
|
)
|
1,822
|
||||
Net
Cash Flows From (Used For) Operating Activities
|
81,341
|
(105,434
|
)
|
||||
INVESTING
ACTIVITIES
|
|||||||
Construction
Expenditures
|
(136,475
|
)
|
(60,972
|
)
|
|||
Change
in Other Cash Deposits, Net
|
9,340
|
(107,494
|
)
|
||||
Purchases
of Investment Securities
|
-
|
(154,364
|
)
|
||||
Sales
of Investment Securities
|
-
|
149,804
|
|||||
Proceeds
from Sale of Assets
|
6,083
|
313,709
|
|||||
Net
Cash Flows From (Used For) Investing Activities
|
(121,052
|
)
|
140,683
|
||||
FINANCING
ACTIVITIES
|
|||||||
Issuance
of Long-term Debt - Nonaffiliated
|
-
|
276,690
|
|||||
Issuance
of Long-term Debt - Affiliated
|
125,000
|
-
|
|||||
Change
in Advances from Affiliates, Net
|
(54,154
|
)
|
119,857
|
||||
Retirement
of Long-term Debt
|
(30,641
|
)
|
(279,386
|
)
|
|||
Retirement
of Preferred Stock
|
(1
|
)
|
-
|
||||
Principal
Payments for Capital Lease Obligations
|
(372
|
)
|
(221
|
)
|
|||
Dividends
Paid on Cumulative Preferred Stock
|
(121
|
)
|
(121
|
)
|
|||
Dividends
Paid on Common Stock
|
-
|
(150,000
|
)
|
||||
Net
Cash From (Used For) Financing Activities
|
39,711
|
(33,181
|
)
|
||||
Net
Increase in Cash and Cash Equivalents
|
-
|
2,068
|
|||||
Cash
and Cash Equivalents at Beginning of Period
|
-
|
26
|
|||||
Cash
and Cash Equivalents at End of Period
|
$
|
-
|
$
|
2,094
|
|||
SUPPLEMENTAL
DISCLOSURE
|
|||||||
Cash
Paid for Interest, Net of Capitalized Amounts
|
$
|
51,577
|
$
|
52,441
|
|||
Cash
Paid for Income Taxes, Net of Refunds
|
13,440
|
161,372
|
|||||
Noncash
Acquisitions Under Capital Leases
|
2,145
|
261
|
|||||
Construction
Expenditures Included in Accounts Payable at June 30,
|
14,840
|
3,970
|
|||||
See
Condensed Notes to Condensed Financial Statements of Registrant
Subsidiaries .
|
Footnote
Reference
|
|
Significant
Accounting Matters
|
Note
1
|
New
Accounting Pronouncements
|
Note
2
|
Rate
Matters
|
Note
3
|
Customer
Choice and Industry Restructuring
|
Note
4
|
Commitments
and Contingencies
|
Note
5
|
Guarantees
|
Note
6
|
Company-wide
Staffing and Budget Review
|
Note
7
|
Assets
Held for Sale
|
Note
8
|
Benefit
Plans
|
Note
9
|
Income
Taxes
|
Note
10
|
Business
Segments
|
Note
11
|
Financing
Activities
|
Note
12
|
Second
Quarter of 2005
|
$
|
12
|
|||||
Changes
in Gross Margin:
|
|||||||
Texas
Supply
|
(14
|
)
|
|||||
Texas
Wires
|
(1
|
)
|
|||||
Off-system
Sales
|
(2
|
)
|
|||||
Transmission
Revenues
|
(3
|
)
|
|||||
Other
|
(3
|
)
|
|||||
Total
Change in Gross Margin
|
(23
|
)
|
|||||
Changes
in Operating Expenses and Other:
|
|||||||
Other
Operation and Maintenance
|
3
|
||||||
Income
Tax Expense
|
7
|
||||||
Second
Quarter of 2006
|
$
|
(1
|
)
|
·
|
Texas
Supply margins decreased $14 million primarily due to a $19 million
decrease in dedicated ERCOT energy sales, offset by $9 million
of lower
fuel and purchased power costs. This decrease in Texas Supply margins
was
affected by increased generation outages and market conditions
within
ERCOT.
|
·
|
Transmission
Revenues decreased $3 million primarily due to reduced affiliated
transmission fees resulting from the elimination of the affiliated
OATT.
|
·
|
Other
revenues decreased $3 million primarily due to the completion of
certain
third party construction projects, primarily related to work performed
for
the Lower Colorado River Authority.
|
·
|
Other
Operation and Maintenance expenses decreased $3 million primarily
due to
lower expenses related to the completion of certain third party
construction projects, primarily related to work performed for
the Lower
Colorado River Authority.
|
Six
Months Ended June 30, 2005
|
$
|
19
|
|||||
Changes
in Gross Margin:
|
|||||||
Texas
Supply
|
(17
|
)
|
|||||
Texas
Wires
|
(1
|
)
|
|||||
Off-system
Sales
|
(1
|
)
|
|||||
Transmission
Revenues
|
(5
|
)
|
|||||
Other
|
(40
|
)
|
|||||
Total
Change in Gross Margin
|
(64
|
)
|
|||||
Changes
in Operating Expenses and Other:
|
|||||||
Other
Operation and Maintenance
|
37
|
||||||
Interest
Expense
|
1
|
||||||
Total
Change in Operating Expenses and Other
|
38
|
||||||
Income
Tax Expense
|
10
|
||||||
Six
Months Ended June 30, 2006
|
$
|
3
|
·
|
Texas
Supply margins decreased $17 million primarily due to a $25 million
decrease in dedicated ERCOT energy sales, offset by $12 million
of lower
fuel and purchased power costs. This decrease in Texas Supply margins
was
affected by increased generation outages and market conditions
within
ERCOT.
|
·
|
Transmission
Revenues decreased $5 million primarily due to reduced affiliated
transmission fees resulting from the elimination of the affiliated
OATT.
|
·
|
Other
revenues decreased $40 million primarily resulting from the completion
of
certain third party construction projects, primarily related to
work
performed for the Lower Colorado River
Authority.
|
·
|
Other
Operation and Maintenance expenses decreased $37 million primarily
due to
lower expenses related to the completion of certain third party
construction projects, primarily related to work performed for
the Lower
Colorado River Authority.
|
Moody’s
|
S&P
|
Fitch
|
|||
First
Mortgage Bonds
|
A3
|
BBB
|
A
|
||
Senior
Unsecured Debt
|
Baa1
|
BBB
|
A-
|
|
MTM
Risk Management Contracts
|
|
|
Cash
Flow Hedges
|
|
|
Total
|
|||
Current
Assets
|
$
|
-
|
$
|
552
|
$
|
552
|
||||
Noncurrent
Assets
|
-
|
4,027
|
4,027
|
|||||||
Total
MTM Derivative Contract Assets
|
-
|
4,579
|
4,579
|
|||||||
Current
Liabilities
|
-
|
(843
|
)
|
(843
|
)
|
|||||
Noncurrent
Liabilities
|
-
|
-
|
-
|
|||||||
Total
MTM Derivative Contract Liabilities
|
-
|
(843
|
)
|
(843
|
)
|
|||||
Total
MTM Derivative Contract Net Assets
|
$
|
-
|
$
|
3,736
|
$
|
3,736
|
Total
MTM Risk Management Contract Net Assets at December 31,
2005
|
$
|
2,698
|
||
(Gain)
Loss from Contracts Realized/Settled During the Period and Entered
in a
Prior Period
|
(678
|
)
|
||
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)
|
(1,206
|
)
|
||
Changes
Due to SIA and CSW Operating Agreement (c)
|
(814
|
)
|
||
Changes
in Fair Value Allocated to Regulated Jurisdictions (d)
|
-
|
|||
Total
MTM Risk Management Contract Net Assets
|
-
|
|||
Net
Cash Flow Hedge Contracts
|
3,736
|
|||
Total
MTM Risk Management Contract Net Assets at June 30,
2006
|
$
|
3,736
|
(a)
|
Most
of the fair value comes from longer term fixed price contracts
with
customers that seek 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)
|
See
“Allocation Agreement between AEP East companies and AEP West companies”
section of this Management's Financial Discussion and
Analysis.
|
(d)
|
“Changes
in Fair Value Allocated to Regulated Jurisdictions” relates to the net
gains (losses) of those contracts that are not reflected in the
Condensed
Statements of Income. These net gains (losses) are recorded as
regulatory
liabilities/assets for those subsidiaries that operate in regulated
jurisdictions.
|
|
Power
|
|||
Beginning
Balance in AOCI December 31, 2005
|
$
|
(111
|
)
|
|
Changes
in Fair Value
|
2,429
|
|||
Impact
Due to Change in SIA (a)
|
98
|
|||
Reclassifications
from AOCI to Net Income for Cash Flow Hedges Settled
|
13
|
|||
Ending
Balance in AOCI June 30, 2006
|
$
|
2,429
|
(a)
|
See
“Allocating Agreement between AEP East companies and AEP West companies”
section of this Management’s Financial Discussion and
Analysis.
|
Six
Months Ended
June
30, 2006
|
Twelve
Months Ended
December
31, 2005
|
||||||||||||||||
(in
thousands)
|
(in
thousands)
|
||||||||||||||||
End
|
High
|
Average
|
Low
|
End
|
High
|
Average
|
Low
|
||||||||||
$-
|
$23
|
$6
|
$-
|
$55
|
$92
|
$44
|
$16
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|||
REVENUES
|
|||||||||||||
Electric
Generation, Transmission and Distribution
|
$
|
71,051
|
$
|
97,199
|
$
|
139,876
|
$
|
169,088
|
|||||
Sales
to AEP Affiliates
|
11,860
|
12,880
|
17,885
|
24,170
|
|||||||||
Other
|
87
|
4,625
|
(97
|
)
|
40,353
|
||||||||
TOTAL
|
82,998
|
114,704
|
157,664
|
233,611
|
|||||||||
EXPENSES
|
|||||||||||||
Fuel
and Other Consumables for Electric Generation
|
7,044
|
11,356
|
19,159
|
24,339
|
|||||||||
Purchased
Electricity for Resale
|
32,883
|
37,604
|
47,279
|
53,964
|
|||||||||
Other
Operation
|
21,633
|
24,587
|
40,189
|
78,257
|
|||||||||
Maintenance
|
5,216
|
4,920
|
10,417
|
9,139
|
|||||||||
Depreciation
and Amortization
|
10,182
|
10,362
|
20,405
|
20,517
|
|||||||||
Taxes
Other Than Income Taxes
|
5,856
|
5,713
|
11,396
|
11,418
|
|||||||||
TOTAL
|
82,814
|
94,542
|
148,845
|
197,634
|
|||||||||
OPERATING
INCOME
|
184
|
20,162
|
8,819
|
35,977
|
|||||||||
Other
Income (Expense):
|
|||||||||||||
Interest
Income
|
120
|
542
|
339
|
798
|
|||||||||
Allowance
for Equity Funds Used During Construction
|
108
|
156
|
490
|
229
|
|||||||||
Interest
Expense
|
(4,517
|
)
|
(4,869
|
)
|
(8,879
|
)
|
(9,853
|
)
|
|||||
INCOME
(LOSS) BEFORE INCOME TAXES
|
(4,105
|
)
|
15,991
|
769
|
27,151
|
||||||||
Income
Tax Expense (Credit)
|
(3,513
|
)
|
3,987
|
(2,473
|
)
|
7,753
|
|||||||
NET
INCOME (LOSS)
|
(592
|
)
|
12,004
|
3,242
|
19,398
|
||||||||
Preferred
Stock Dividend Requirements
|
26
|
26
|
52
|
52
|
|||||||||
Gain
on Reacquired Preferred Stock
|
-
|
-
|
2
|
-
|
|||||||||
EARNINGS
(LOSS) APPLICABLE TO COMMON STOCK
|
$
|
(618
|
)
|
$
|
11,978
|
$
|
3,192
|
$
|
19,346
|
|
Common
Stock
|
|
|
Paid-in
Capital
|
|
|
Retained
Earnings
|
|
|
Accumulated
Other Comprehensive Income (Loss)
|
|
|
Total
|
|||
DECEMBER
31, 2004
|
$
|
137,214
|
$
|
2,351
|
$
|
170,984
|
$
|
(128
|
)
|
$
|
310,421
|
|||||
Common
Stock Dividends
|
(12,626
|
)
|
(12,626
|
)
|
||||||||||||
Preferred
Stock Dividends
|
(52
|
)
|
(52
|
)
|
||||||||||||
TOTAL
|
297,743
|
|||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||
Other
Comprehensive Loss, Net of Taxes:
|
||||||||||||||||
Cash
Flow Hedges, Net of Tax of $236
|
(439
|
)
|
(439
|
)
|
||||||||||||
NET
INCOME
|
19,398
|
19,398
|
||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
18,959
|
|||||||||||||||
JUNE
30, 2005
|
$
|
137,214
|
$
|
2,351
|
$
|
177,704
|
$
|
(567
|
)
|
$
|
316,702
|
|||||
DECEMBER
31, 2005
|
$
|
137,214
|
$
|
2,351
|
$
|
174,858
|
$
|
(504
|
)
|
$
|
313,919
|
|||||
Common
Stock Dividends
|
(12,750
|
)
|
(12,750
|
)
|
||||||||||||
Preferred
Stock Dividends
|
(52
|
)
|
(52
|
)
|
||||||||||||
Gain
on Reacquired Preferred Stock
|
2
|
2
|
||||||||||||||
TOTAL
|
301,119
|
|||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||
Other
Comprehensive Income, Net of Taxes:
|
||||||||||||||||
Cash
Flow Hedges, Net of Tax of $1,368
|
2,540
|
2,540
|
||||||||||||||
NET
INCOME
|
3,242
|
3,242
|
||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
5,782
|
|||||||||||||||
JUNE
30, 2006
|
$
|
137,214
|
$
|
2,351
|
$
|
165,300
|
$
|
2,036
|
$
|
306,901
|
2006
|
|
|
2005
|
|
|||
CURRENT
ASSETS
|
|||||||
Cash
and Cash Equivalents
|
$
|
-
|
$
|
-
|
|||
Other
Cash Deposits
|
8,993
|
1,432
|
|||||
Advances
to Affiliates
|
-
|
34,286
|
|||||
Accounts
Receivable:
|
|||||||
Customers
|
24,702
|
77,678
|
|||||
Affiliated
Companies
|
8,176
|
26,149
|
|||||
Accrued
Unbilled Revenues
|
4,383
|
5,016
|
|||||
Allowance
for Uncollectible Accounts
|
(23
|
)
|
(18
|
)
|
|||
Total Accounts Receivable
|
37,238
|
108,825
|
|||||
Fuel
|
7,000
|
2,636
|
|||||
Materials
and Supplies
|
7,743
|
6,858
|
|||||
Risk
Management Assets
|
552
|
7,114
|
|||||
Prepayments
and Other
|
3,665
|
3,772
|
|||||
TOTAL
|
65,191
|
164,923
|
|||||
PROPERTY,
PLANT AND EQUIPMENT
|
|||||||
Electric:
|
|||||||
Production
|
290,261
|
288,934
|
|||||
Transmission
|
324,294
|
289,029
|
|||||
Distribution
|
502,917
|
492,878
|
|||||
Other
|
164,500
|
167,849
|
|||||
Construction
Work in Progress
|
23,223
|
46,424
|
|||||
Total
|
1,305,195
|
1,285,114
|
|||||
Accumulated
Depreciation and Amortization
|
479,043
|
478,519
|
|||||
TOTAL
- NET
|
826,152
|
806,595
|
|||||
OTHER
NONCURRENT ASSETS
|
|||||||
Regulatory
Assets
|
9,078
|
9,787
|
|||||
Long-term
Risk Management Assets
|
4,027
|
5,772
|
|||||
Employee
Benefits and Pension Assets
|
45,702
|
46,289
|
|||||
Deferred
Charges and Other
|
10,930
|
10,468
|
|||||
TOTAL
|
69,737
|
72,316
|
|||||
TOTAL
ASSETS
|
$
|
961,080
|
$
|
1,043,834
|
2006
|
|
|
2005
|
||||
CURRENT
LIABILITIES
|
(in
thousands)
|
||||||
Advances
from Affiliates
|
$
|
6,005
|
$
|
-
|
|||
Accounts
Payable:
|
|||||||
General
|
13,767
|
19,739
|
|||||
Affiliated
Companies
|
27,450
|
84,923
|
|||||
Long-term
Debt Due Within One Year - Nonaffiliated
|
8,151
|
-
|
|||||
Risk
Management Liabilities
|
843
|
6,475
|
|||||
Accrued
Taxes
|
19,904
|
21,212
|
|||||
Other
|
11,926
|
21,050
|
|||||
TOTAL
|
88,046
|
153,399
|
|||||
NONCURRENT
LIABILITIES
|
|||||||
Long-term
Debt - Nonaffiliated
|
268,739
|
276,845
|
|||||
Long-term
Risk Management Liabilities
|
-
|
3,906
|
|||||
Deferred
Income Taxes
|
127,114
|
132,335
|
|||||
Regulatory
Liabilities and Deferred Investment Tax Credits
|
146,653
|
139,732
|
|||||
Deferred
Credits and Other
|
21,278
|
21,341
|
|||||
TOTAL
|
563,784
|
574,159
|
|||||
TOTAL
LIABILITIES
|
651,830
|
727,558
|
|||||
Cumulative
Preferred Stock Not Subject to Mandatory Redemption
|
2,349
|
2,357
|
|||||
Commitments
and Contingencies (Note 5)
|
|||||||
COMMON
SHAREHOLDER’S EQUITY
|
|||||||
Common
Stock - $25 Par Value Per Share:
|
|||||||
Authorized
- 7,800,000 Shares
|
|||||||
Outstanding
- 5,488,560 Shares
|
137,214
|
137,214
|
|||||
Paid-in
Capital
|
2,351
|
2,351
|
|||||
Retained
Earnings
|
165,300
|
174,858
|
|||||
Accumulated
Other Comprehensive Income (Loss)
|
2,036
|
(504
|
)
|
||||
TOTAL
|
306,901
|
313,919
|
|||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
961,080
|
$
|
1,043,834
|
2006
|
|
|
2005
|
||||
OPERATING
ACTIVITIES
|
|||||||
Net
Income
|
$
|
3,242
|
$
|
19,398
|
|||
Adjustments
for Noncash Items:
|
|||||||
Depreciation
and Amortization
|
20,405
|
20,517
|
|||||
Deferred
Income Taxes
|
(3,183
|
)
|
(1,742
|
)
|
|||
Mark-to-Market
of Risk Management Contracts
|
2,698
|
3,062
|
|||||
Deferred
Property Taxes
|
(8,408
|
)
|
(8,145
|
)
|
|||
Change
in Other Noncurrent Assets
|
(3,302
|
)
|
(1,937
|
)
|
|||
Change
in Other Noncurrent Liabilities
|
1,904
|
2,202
|
|||||
Changes
in Components of Working Capital:
|
|||||||
Accounts
Receivable, Net
|
71,587
|
4,654
|
|||||
Fuel,
Materials and Supplies
|
(5,249
|
)
|
(2,495
|
)
|
|||
Accounts
Payable
|
(62,323
|
)
|
11,893
|
||||
Accrued
Taxes, Net
|
(4,046
|
)
|
(11,847
|
)
|
|||
Customer
Deposits
|
(3,571
|
)
|
(388
|
)
|
|||
Other
Current Assets
|
2,845
|
14,577
|
|||||
Other
Current Liabilities
|
(4,582
|
)
|
(710
|
)
|
|||
Net
Cash Flows From Operating Activities
|
8,017
|
49,039
|
|||||
INVESTING
ACTIVITIES
|
|||||||
Construction
Expenditures
|
(36,675
|
)
|
(24,177
|
)
|
|||
Change
in Other Cash Deposits, Net
|
1,073
|
-
|
|||||
Change
In Advances to Affiliates, Net
|
34,286
|
(12,161
|
)
|
||||
Proceeds
from Sale of Assets
|
250
|
1,033
|
|||||
Net
Cash Flows Used For Investing Activities
|
(1,066
|
)
|
(35,305
|
)
|
|||
FINANCING
ACTIVITIES
|
|||||||
Change
in Advances from Affiliates, Net
|
6,005
|
-
|
|||||
Retirement
of Preferred Stock
|
(6
|
)
|
-
|
||||
Principal
Payments for Capital Lease Obligations
|
(148
|
)
|
(118
|
)
|
|||
Dividends
Paid on Common Stock
|
(12,750
|
)
|
(12,626
|
)
|
|||
Dividends
Paid on Cumulative Preferred Stock
|
(52
|
)
|
(52
|
)
|
|||
Net
Cash Flows Used For Financing Activities
|
(6,951
|
)
|
(12,796
|
)
|
|||
Net
Increase in Cash and Cash Equivalents
|
-
|
938
|
|||||
Cash
and Cash Equivalents at Beginning of Period
|
-
|
-
|
|||||
Cash
and Cash Equivalents at End of Period
|
$
|
-
|
$
|
938
|
|||
SUPPLEMENTAL
DISCLOSURE
|
|||||||
Cash
Paid for Interest, Net of Capitalized Amounts
|
$
|
7,809
|
$
|
9,014
|
|||
Cash
Paid for Income Taxes, Net of Refunds
|
6,079
|
21,865
|
|||||
Noncash
Acquisitions Under Capital Leases
|
749
|
171
|
|||||
Construction
Expenditures Included in Accounts Payable at June 30,
|
2,037
|
1,726
|
|||||
See
Condensed Notes to Condensed Financial Statements of Registrant
Subsidiaries.
|
Footnote
Reference
|
|
Significant
Accounting Matters
|
Note
1
|
New
Accounting Pronouncements
|
Note
2
|
Rate
Matters
|
Note
3
|
Customer
Choice and Industry Restructuring
|
Note
4
|
Commitments
and Contingencies
|
Note
5
|
Guarantees
|
Note
6
|
Company-wide
Staffing and Budget Review
|
Note
7
|
Benefit
Plans
|
Note
9
|
Income
Taxes
|
Note
10
|
Business
Segments
|
Note
11
|
Financing
Activities
|
Note
12
|
Second
Quarter of 2005
|
$
|
24
|
|||||
Changes
in Gross Margin:
|
|||||||
Retail
Margins
|
5
|
||||||
Off-system
Sales
|
1
|
||||||
Transmission
Revenues
|
(17
|
)
|
|||||
Other
|
(1
|
)
|
|||||
Total
Change in Gross Margin
|
(12
|
)
|
|||||
Changes
in Operating Expenses and Other:
|
|||||||
Other
Operation and Maintenance
|
(10
|
)
|
|||||
Depreciation
and Amortization
|
(2
|
)
|
|||||
Taxes
Other Than Income Taxes
|
1
|
||||||
Carrying
Costs Income
|
4
|
||||||
Interest
Expense
|
(4
|
)
|
|||||
Other
Income
|
4
|
||||||
Total
Change in Operating Expenses and Other
|
(7
|
)
|
|||||
Income
Tax Expense
|
5
|
||||||
Second
Quarter of 2006
|
$
|
10
|
·
|
Retail
Margins increased $5 million in comparison to 2005 primarily due
to an $8
million reduction in capacity settlement payments under the
Interconnection Agreement due to our lower member load ratio (MLR)
share
and our increased capacity, an $8 million increase in revenues
related to
financial transmission rights, net of congestion, and a $7 million
increase in retail revenues primarily related to two new industrial
customers. The increase in financial transmission rights revenue
is due to
improved management of price risk related to serving retail load
under
current transmission constraints. These increases were partially
offset by
a $15 million decline in fuel margins caused primarily by higher
fuel
costs.
|
·
|
Transmission
Revenues decreased $17 million primarily due to the elimination of
SECA revenues as of April 1, 2006 and a $5 million provision for
potential
SECA refunds pending settlement negotiations with various intervenors.
See
the “SECA Revenue Subject to Refund” section of Note 3 - Rate
Matters.
|
·
|
Other
Operation and Maintenance expenses increased $10 million mainly
due to a
$5 million increase in planned maintenance outages and an increase
of $4
million related to increased expenses for overhead line right-of-way
clearing and overhead line repairs.
|
·
|
Carrying
Costs Income increased $4 million primarily due to the establishment
of a
regulatory asset for carrying costs related to the Virginia environmental
and reliability costs incurred.
|
·
|
Interest
Expense increased $4 million primarily due to long-term debt issuances
in
2006, partially offset by an increase in allowance for borrowed
funds used
during construction.
|
·
|
Other
Income increased $4 million primarily due to interest income related
to an
increase in Advances to Affiliates.
|
Six
Months Ended June 30, 2005
|
$
|
71
|
|||||
Changes
in Gross Margin:
|
|||||||
Retail
Margins
|
33
|
||||||
Transmission
Revenues
|
(16
|
)
|
|||||
Other
|
1
|
||||||
Total
Change in Gross Margin
|
18
|
||||||
Changes
in Operating Expenses and Other:
|
|||||||
Other
Operation and Maintenance
|
3
|
||||||
Taxes
Other Than Income Taxes
|
2
|
||||||
Carrying
Costs Income
|
10
|
||||||
Interest
Expense
|
(11
|
)
|
|||||
Other
Income
|
4
|
||||||
Total
Change in Operating Expenses and Other
|
8
|
||||||
Income
Tax Expense
|
(14
|
)
|
|||||
Six
Months Ended June 30, 2006
|
$
|
83
|
·
|
Retail
Margins increased $33 million in comparison to 2005 primarily due
to a $24
million increase in revenues related to financial transmission
rights, net
of congestion, a $17 million increase in retail revenues primarily
related
to two new industrial customers and a $12 million reduction in
capacity
settlement payments under the Interconnection Agreement due to
our lower
MLR share and our increased capacity. These increases were partially
offset by a $14 million decline in fuel margins caused primarily
by higher
fuel costs.
|
·
|
Transmission
Revenues decreased $16 million primarily due to the elimination of
SECA revenues as of April 1, 2006 and a $5 million provision for
potential
SECA refunds pending settlement negotiations with various intervenors.
See
the “SECA Revenue Subject to Refund” section of Note 3 - Rate
Matters.
|
·
|
Carrying
Costs Income increased $10 million primarily due to the establishment
of a
regulatory asset for carrying costs related to the Virginia environmental
and reliability costs incurred.
|
·
|
Interest
Expense increased $11 million primarily due to long-term debt issuances
in
2006, partially offset by an increase in allowance for borrowed
funds used
during construction.
|
·
|
Other
Income increased $4 million primarily due to interest income related
to an
increase in Advances to Affiliates.
|
Moody’s
|
S&P
|
Fitch
|
|||
Senior
Unsecured Debt
|
Baa2
|
BBB
|
BBB+
|
2006
|
2005
|
||||||
(in
thousands)
|
|||||||
Cash
and Cash Equivalents at Beginning of Period
|
$
|
1,741
|
$
|
1,543
|
|||
Net
Cash Flows From (Used For):
|
|||||||
Operating
Activities
|
320,554
|
87,588
|
|||||
Investing
Activities
|
(622,504
|
)
|
(269,487
|
)
|
|||
Financing
Activities
|
301,555
|
181,637
|
|||||
Net
Decrease in Cash and Cash Equivalents
|
(395
|
)
|
(262
|
)
|
|||
Cash
and Cash Equivalents at End of Period
|
$
|
1,346
|
$
|
1,281
|
Principal
Amount
|
Interest
|
Due
|
|||||
Type
of Debt
|
Rate
|
Date
|
|||||
(in
thousands)
|
(%)
|
||||||
Pollution
Control Bonds
|
$
|
50,275
|
Variable
|
2036
|
|||
Senior
Unsecured Notes
|
250,000
|
5.55
|
2011
|
||||
Senior
Unsecured Notes
|
250,000
|
6.375
|
2036
|
Principal
Amount
|
Interest
|
Due
|
|||||
Type
of Debt
|
Rate
|
Date
|
|||||
(in
thousands)
|
(%)
|
||||||
First
Mortgage Bonds
|
$
|
100,000
|
6.80
|
2006
|
|||
Other
Debt
|
5
|
13.718
|
2026
|
|
MTM
Risk Management Contracts
|
|
|
Cash
Flow &
Fair
Value Hedges
|
|
|
DETM
Assignment (a)
|
|
|
Total
|
|||
Current
Assets
|
$
|
71,996
|
$
|
18,587
|
$
|
-
|
$
|
90,583
|
|||||
Noncurrent
Assets
|
126,964
|
989
|
-
|
127,953
|
|||||||||
Total
MTM Derivative Contract Assets
|
198,960
|
19,576
|
-
|
218,536
|
|||||||||
Current
Liabilities
|
(54,973
|
)
|
(4,849
|
)
|
(1,610
|
)
|
(61,432
|
)
|
|||||
Noncurrent
Liabilities
|
(88,104
|
)
|
(936
|
)
|
(10,331
|
)
|
(99,371
|
)
|
|||||
Total
MTM Derivative Contract Liabilities
|
(143,077
|
)
|
(5,785
|
)
|
(11,941
|
)
|
(160,803
|
)
|
|||||
Total
MTM Derivative Contract Net Assets (Liabilities)
|
$
|
55,883
|
$
|
13,791
|
$
|
(11,941
|
)
|
$
|
57,733
|
(a)
|
See
“Natural Gas Contracts with DETM” section of Note 17 of the 2005 Annual
Report.
|
Total
MTM Risk Management Contract Net Assets at December 31,
2005
|
$
|
56,407
|
||
(Gain)
Loss from Contracts Realized/Settled During the Period and Entered
in a
Prior Period
|
(4,766
|
)
|
||
Fair
Value of New Contracts at Inception When Entered During the Period
(a)
|
137
|
|||
Net
Option Premiums Paid/(Received) for Unexercised or Unexpired Option
Contracts Entered During the Period
|
(1,234
|
)
|
||
Change
in Fair Value Due to Valuation Methodology Changes on Forward
Contracts
|
359
|
|||
Changes
in Fair Value Due to Market Fluctuations During the Period
(b)
|
4,968
|
|||
Changes
due to SIA Agreement (c)
|
(6,533
|
)
|
||
Changes
in Fair Value Allocated to Regulated Jurisdictions (d)
|
6,545
|
|||
Total
MTM Risk Management Contract Net Assets
|
55,883
|
|||
Net
Cash Flow & Fair Value Hedge Contracts
|
13,791
|
|||
DETM
Assignment (e)
|
(11,941
|
)
|
||
Total
MTM Risk Management Contract Net Assets at June 30,
2006
|
$
|
57,733
|
(a)
|
Most
of the fair value comes from longer term fixed price contracts
with
customers that seek 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)
|
See
“Allocation Agreement between AEP East companies and AEP West companies
and CSW Operating Agreement” section of Note 3.
|
(d)
|
“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.
|
(e)
|
See
“Natural Gas Contracts with DETM” section of Note 17 of the 2005 Annual
Report.
|
·
|
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 giving an indication
of
when these MTM amounts will settle and generate
cash.
|
Remainder
2006
|
2007
|
2008
|
2009
|
2010
|
After
2010
|
Total
|
||||||||||||||||
Prices
Actively Quoted - Exchange Traded
Contracts
|
$
|
(3,470
|
)
|
$
|
3,878
|
$
|
3,971
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
4,379
|
|||||||
Prices
Provided by Other External Sources
- OTC
Broker Quotes
(a)
|
11,195
|
10,112
|
3,861
|
7,480
|
-
|
-
|
32,648
|
|||||||||||||||
Prices
Based on Models and Other Valuation
Methods (b)
|
276
|
450
|
2,585
|
4,118
|
8,704
|
2,723
|
18,856
|
|||||||||||||||
Total
|
$
|
8,001
|
$
|
14,440
|
$
|
10,417
|
$
|
11,598
|
$
|
8,704
|
$
|
2,723
|
$
|
55,883
|
(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 pricing
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.
|
Power
|
|
|
Foreign
Currency
|
|
|
Interest
Rate
|
|
|
Total
|
||||
Beginning
Balance in AOCI December 31, 2005
|
$
|
(1,480
|
)
|
$
|
(171
|
)
|
$
|
(14,770
|
)
|
$
|
(16,421
|
)
|
|
Changes
in Fair Value
|
10,987
|
-
|
4,951
|
15,938
|
|||||||||
Impact
due to Changes in SIA (a)
|
(442
|
)
|
-
|
-
|
(442
|
)
|
|||||||
Reclassifications
from AOCI to Net Income for Cash Flow
Hedges Settled
|
1,089
|
3
|
1,410
|
2,502
|
|||||||||
Ending
Balance in AOCI June 30, 2006
|
$
|
10,154
|
$
|
(168
|
)
|
$
|
(8,409
|
)
|
$
|
1,577
|
(a)
|
See
“Allocation Agreement between AEP East companies and AEP West companies
and CSW Operating Agreement” section of Note
3.
|
Six
Months Ended
June
30, 2006
|
Twelve
Months Ended
December
31, 2005
|
||||||||||||||||
(in
thousands)
|
(in
thousands)
|
||||||||||||||||
End
|
High
|
Average
|
Low
|
End
|
High
|
Average
|
Low
|
||||||||||
$685
|
$1,604
|
$695
|
$401
|
$732
|
$1,216
|
$579
|
$209
|
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
||||
REVENUES
|
|||||||||||||
Electric
Generation, Transmission and Distribution
|
$
|
464,058
|
$
|
436,343
|
$
|
1,024,051
|
$
|
912,370
|
|||||
Sales
to AEP Affiliates
|
48,608
|
58,927
|
120,380
|
138,097
|
|||||||||
Other
|
1,922
|
1,832
|
4,598
|
4,330
|
|||||||||
TOTAL
|
514,588
|
497,102
|
1,149,029
|
1,054,797
|
|||||||||
EXPENSES
|
|||||||||||||
Fuel
and Other Consumables for Electric Generation
|
155,240
|
125,759
|
322,093
|
240,903
|
|||||||||
Purchased
Electricity for Resale
|
29,979
|
26,732
|
57,595
|
54,965
|
|||||||||
Purchased
Electricity from AEP Affiliates
|
103,457
|
107,023
|
225,856
|
233,986
|
|||||||||
Other
Operation
|
77,458
|
76,722
|
147,655
|
150,495
|
|||||||||
Maintenance
|
46,668
|
37,266
|
84,507
|
84,456
|
|||||||||
Depreciation
and Amortization
|
48,386
|
46,491
|
96,358
|
96,450
|
|||||||||
Taxes
Other Than Income Taxes
|
22,799
|
23,357
|
45,891
|
47,431
|
|||||||||
TOTAL
|
483,987
|
443,350
|
979,955
|
908,686
|
|||||||||
OPERATING
INCOME
|
30,601
|
53,752
|
169,074
|
146,111
|
|||||||||
Other
Income (Expense):
|
|||||||||||||
Interest
Income
|
2,814
|
443
|
3,765
|
1,005
|
|||||||||
Carrying
Costs Income
|
7,773
|
3,967
|
13,784
|
4,065
|
|||||||||
Allowance
for Equity Funds Used During Construction
|
4,083
|
2,557
|
6,559
|
4,768
|
|||||||||
Interest
Expense
|
(31,653
|
)
|
(27,145
|
)
|
(61,921
|
)
|
(51,344
|
)
|
|||||
INCOME
BEFORE INCOME TAXES
|
13,618
|
33,574
|
131,261
|
104,605
|
|||||||||
Income
Tax Expense
|
3,971
|
9,361
|
48,020
|
33,720
|
|||||||||
NET
INCOME
|
9,647
|
24,213
|
83,241
|
70,885
|
|||||||||
Preferred
Stock Dividend Requirements Including Capital
Stock Expense
and Other
|
238
|
905
|
476
|
1,702
|
|||||||||
EARNINGS
APPLICABLE TO COMMON STOCK
|
$
|
9,409
|
$
|
23,308
|
$
|
82,765
|
$
|
69,183
|
Common
Stock
|
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other Comprehensive Income (Loss)
|
Total
|
||||||||||||
DECEMBER
31, 2004
|
$
|
260,458
|
$
|
722,314
|
$
|
508,618
|
$
|
(81,672
|
)
|
$
|
1,409,718
|
|||||
Capital
Contribution From Parent
|
100,000
|
100,000
|
||||||||||||||
Preferred
Stock Dividends
|
(400
|
)
|
(400
|
)
|
||||||||||||
Capital
Stock Expense and Other
|
2,447
|
(1,302
|
)
|
1,145
|
||||||||||||
TOTAL
|
1,510,463
|
|||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||
Other
Comprehensive Loss, Net of Taxes:
|
||||||||||||||||
Cash
Flow Hedges, Net of Tax of $7,474
|
(13,882
|
)
|
(13,882
|
)
|
||||||||||||
NET
INCOME
|
70,885
|
70,885
|
||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
57,003
|
|||||||||||||||
JUNE
30, 2005
|
$
|
260,458
|
$
|
824,761
|
$
|
577,801
|
$
|
(95,554
|
)
|
$
|
1,567,466
|
|||||
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
|
2006
|
|
|
2005
|
||||
CURRENT
ASSETS
|
|||||||
Cash
and Cash Equivalents
|
$
|
1,346
|
$
|
1,741
|
|||
Advances
to Affiliates
|
218,702
|
-
|
|||||
Accounts
Receivable:
|
|||||||
Customers
|
168,893
|
141,810
|
|||||
Affiliated
Companies
|
86,461
|
153,453
|
|||||
Accrued
Unbilled Revenues
|
30,571
|
51,201
|
|||||
Miscellaneous
|
3,658
|
527
|
|||||
Allowance
for Uncollectible Accounts
|
(4,742
|
)
|
(1,805
|
)
|
|||
Total Accounts Receivable
|
284,841
|
345,186
|
|||||
Fuel
|
72,947
|
64,657
|
|||||
Materials
and Supplies
|
55,288
|
54,967
|
|||||
Risk
Management Assets
|
90,583
|
132,247
|
|||||
Accrued
Tax Benefits
|
-
|
32,979
|
|||||
Prepayments
and Other
|
37,559
|
75,129
|
|||||
TOTAL
|
761,266
|
706,906
|
|||||
PROPERTY,
PLANT AND EQUIPMENT
|
|||||||
Electric:
|
|||||||
Production
|
2,826,293
|
2,798,157
|
|||||
Transmission
|
1,585,714
|
1,266,855
|
|||||
Distribution
|
2,202,696
|
2,141,153
|
|||||
Other
|
337,359
|
323,158
|
|||||
Construction
Work in Progress
|
593,062
|
647,638
|
|||||
Total
|
7,545,124
|
7,176,961
|
|||||
Accumulated
Depreciation and Amortization
|
2,556,021
|
2,524,855
|
|||||
TOTAL
- NET
|
4,989,103
|
4,652,106
|
|||||
OTHER
NONCURRENT ASSETS
|
|||||||
Regulatory
Assets
|
452,651
|
457,294
|
|||||
Long-term
Risk Management Assets
|
127,953
|
176,231
|
|||||
Deferred
Charges and Other
|
252,291
|
261,556
|
|||||
TOTAL
|
832,895
|
895,081
|
|||||
TOTAL
ASSETS
|
$
|
6,583,264
|
$
|
6,254,093
|
2006
|
|
|
2005
|
|
|||
CURRENT
LIABILITIES
|
(in
thousands)
|
||||||
Advances
from Affiliates
|
$
|
-
|
$
|
194,133
|
|||
Accounts
Payable:
|
|||||||
General
|
276,383
|
230,570
|
|||||
Affiliated
Companies
|
78,307
|
85,941
|
|||||
Long-term
Debt Due Within One Year - Nonaffiliated
|
171,645
|
146,999
|
|||||
Risk
Management Liabilities
|
61,432
|
121,165
|
|||||
Customer
Deposits
|
55,030
|
79,854
|
|||||
Accrued
Taxes
|
59,211
|
49,833
|
|||||
Other
|
113,883
|
108,746
|
|||||
TOTAL
|
815,891
|
1,017,241
|
|||||
NONCURRENT
LIABILITIES
|
|||||||
Long-term
Debt - Nonaffiliated
|
2,325,465
|
1,904,379
|
|||||
Long-term
Debt - Affiliated
|
100,000
|
100,000
|
|||||
Long-term
Risk Management Liabilities
|
99,371
|
147,117
|
|||||
Deferred
Income Taxes
|
943,008
|
952,497
|
|||||
Regulatory
Liabilities and Deferred Investment Tax Credits
|
208,725
|
201,230
|
|||||
Deferred
Credits and Other
|
173,494
|
110,144
|
|||||
TOTAL
|
3,850,063
|
3,415,367
|
|||||
TOTAL
LIABILITIES
|
4,665,954
|
4,432,608
|
|||||
Cumulative
Preferred Stock Not Subject to Mandatory Redemption
|
17,766
|
17,784
|
|||||
Commitments
and Contingencies (Note 5)
|
|||||||
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
|
924,917
|
924,837
|
|||||
Retained
Earnings
|
712,781
|
635,016
|
|||||
Accumulated
Other Comprehensive Income (Loss)
|
1,388
|
(16,610
|
)
|
||||
TOTAL
|
1,899,544
|
1,803,701
|
|||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
6,583,264
|
$
|
6,254,093
|
2006
|
|
|
2005
|
||||
OPERATING
ACTIVITIES
|
|||||||
Net
Income
|
$
|
83,241
|
$
|
70,885
|
|||
Adjustments
for Noncash Items:
|
|||||||
Depreciation
and Amortization
|
96,358
|
96,450
|
|||||
Deferred
Income Taxes
|
(1,466
|
)
|
18,206
|
||||
Carrying
Costs Income
|
(13,784
|
)
|
(4,065
|
)
|
|||
Mark-to-Market
of Risk Management Contracts
|
147
|
(13,473
|
)
|
||||
Pension
Contributions to Qualified Plan Trusts
|
-
|
(39,875
|
)
|
||||
Over/Under
Fuel Recovery, Net
|
3,636
|
(8,759
|
)
|
||||
Change
in Other Noncurrent Assets
|
9,872
|
(11,224
|
)
|
||||
Change
in Other Noncurrent Liabilities
|
17,986
|
|
(20,276
|
)
|
|||
Changes
in Components of Working Capital:
|
|||||||
Accounts
Receivable, Net
|
60,345
|
16,710
|
|||||
Fuel,
Materials and Supplies
|
(8,611
|
)
|
(25,875
|
)
|
|||
Margin
Deposits
|
27,872
|
(4,899
|
)
|
||||
Accounts
Payable
|
14,993
|
36,157
|
|||||
Customer
Deposits
|
(24,824
|
)
|
15,447
|
||||
Accrued
Taxes, Net
|
42,357
|
(29,847
|
)
|
||||
Other
Current Assets
|
7,295
|
(4,394
|
)
|
||||
Other
Current Liabilities
|
5,137
|
(3,580
|
)
|
||||
Net
Cash Flows From Operating Activities
|
320,554
|
87,588
|
|||||
INVESTING
ACTIVITIES
|
|||||||
Construction
Expenditures
|
(404,252
|
)
|
(277,177
|
)
|
|||
Change
in Other Cash Deposits, Net
|
-
|
(41
|
)
|
||||
Change
in Advances to Affiliates, Net
|
(218,702
|
)
|
-
|
||||
Proceeds
from Sales of Assets
|
450
|
7,731
|
|||||
Net
Cash Flows Used For Investing Activities
|
(622,504
|
)
|
(269,487
|
)
|
|||
FINANCING
ACTIVITIES
|
|||||||
Capital
Contributions from Parent
|
-
|
100,000
|
|||||
Issuance
of Long-term Debt - Nonaffiliated
|
544,364
|
594,717
|
|||||
Issuance
of Long-term Debt - Affiliated
|
-
|
100,000
|
|||||
Change
in Advances from Affiliates, Net
|
(194,133
|
)
|
(34,368
|
)
|
|||
Retirement
of Long-term Debt - Nonaffiliated
|
(100,005
|
)
|
(575,005
|
)
|
|||
Retirement
of Preferred Stock
|
(14
|
)
|
-
|
||||
Principal
Payments for Capital Lease Obligations
|
(2,768
|
)
|
(3,307
|
)
|
|||
Funds
From Amended Coal Contract, Net
|
59,511
|
-
|
|||||
Dividends
Paid on Common Stock
|
(5,000
|
)
|
-
|
||||
Dividends
Paid on Cumulative Preferred Stock
|
(400
|
)
|
(400
|
)
|
|||
Net
Cash Flows From Financing Activities
|
301,555
|
181,637
|
|||||
Net
Decrease in Cash and Cash Equivalents
|
(395
|
)
|
(262
|
)
|
|||
Cash
and Cash Equivalents at Beginning of Period
|
1,741
|
1,543
|
|||||
Cash
and Cash Equivalents at End of Period
|
$
|
1,346
|
$
|
1,281
|
|||
SUPPLEMENTAL
DISCLOSURE
|
|||||||
Cash
Paid for Interest, Net of Capitalized Amounts
|
$
|
51,558
|
$
|
45,064
|
|||
Cash
Paid for Income Taxes, Net of Refunds
|
4,562
|
47,461
|
|||||
Noncash
Acquisitions Under Capital Leases
|
2,287
|
748
|
|||||
Construction
Expenditures Included in Accounts Payable at June 30,
|
105,826
|
36,339
|
|||||
See
Condensed Notes to Condensed Financial Statements of Registrant
Subsidiaries.
|
Footnote
Reference
|
|
Significant
Accounting Matters
|
Note
1
|
New
Accounting Pronouncements
|
Note
2
|
Rate
Matters
|
Note
3
|
Commitments
and Contingencies
|
Note
5
|
Guarantees
|
Note
6
|
Company-wide
Staffing and Budget Review
|
Note
7
|
Benefit
Plans
|
Note
9
|
Business
Segments
|
Note
11
|
Financing
Activities
|
Note
12
|
Second
Quarter of 2005
|
$
|
35
|
|||||
Changes
in Gross Margin:
|
|||||||
Retail
Margins
|
32
|
||||||
Off-system
Sales
|
2
|
||||||
Transmission
Revenues
|
(9
|
)
|
|||||
Other
|
2
|
||||||
Total
Change in Gross Margin
|
27
|
||||||
Changes
in Operating Expenses and Other:
|
|||||||
Other
Operation and Maintenance
|
(1
|
)
|
|||||
Depreciation
and Amortization
|
(19
|
)
|
|||||
Taxes
Other Than Income Taxes
|
(9
|
)
|
|||||
Carrying
Costs Income
|
(3
|
)
|
|||||
Interest
Expense
|
(2
|
)
|
|||||
Total
Change in Operating Expenses and Other
|
(34
|
)
|
|||||
Income
Tax Expense
|
4
|
||||||
Second
Quarter of 2006
|
$
|
32
|
·
|
Retail
Margins were $32 million higher than the prior period primarily
due to
Rate Stabilization Plan (RSP) and Transition Regulatory Asset rate
increases effective January 1, 2006 as well as the addition of
Monongahela
Power’s Ohio customers on December 31, 2005, partially offset by an
increase in delivered fuel costs.
|
·
|
Transmission
Revenues decreased $9 million primarily due to the elimination
of SECA
revenues as of April 1, 2006 and a $3 million provision for potential
SECA
refunds pending settlement negotiations with various intervenors.
See the
“SECA Revenue Subject to Refund” section of Note 3 - Rate
Matters.
|
·
|
Depreciation
and Amortization expense increased $19 million due to the 2005
RSP order
that resulted in the reversal of unused shopping credits of $18
million
partially offset by the establishment of a $7 million regulatory
liability
to benefit low-income customers and for economic development. Depreciation
expense also increased due to a greater depreciable base resulting
primarily from the acquisitions of the Waterford Plant and Monongahela
Power’s Ohio assets in the second half of 2005.
|
·
|
Taxes
Other Than Income Taxes increased $9 million due to an increase
in real
and personal property taxes.
|
Six
Months Ended June 30, 2005
|
$
|
82
|
|||||
Changes
in Gross Margin:
|
|||||||
Retail
Margins
|
56
|
||||||
Off-system
Sales
|
9
|
||||||
Transmission
Revenues
|
(7
|
)
|
|||||
Other
|
9
|
||||||
Total
Change in Gross Margin
|
67
|
||||||
Changes
in Operating Expenses and Other:
|
|||||||
Other
Operation and Maintenance
|
(16
|
)
|
|||||
Depreciation
and Amortization
|
(27
|
)
|
|||||
Taxes
Other Than Income Taxes
|
(12
|
)
|
|||||
Carrying
Costs Income
|
(5
|
)
|
|||||
Interest
Expense
|
(6
|
)
|
|||||
Total
Change in Operating Expenses and Other
|
(66
|
)
|
|||||
Income
Tax Expense
|
1
|
||||||
Six
Months Ended June 30, 2006
|
$
|
84
|
·
|
Retail
Margins increased $56 million primarily due to the RSP and Transition
Regulatory Asset rate increases effective January 1, 2006 as well
as the
addition of Monongahela Power Ohio customers on December 31, 2005,
partially offset by an increase in delivered fuel
costs.
|
·
|
Off-system
Sales increased $9 million due to higher physical sales partially
offset
by lower optimization activity.
|
·
|
Transmission
Revenues decreased $7 million primarily due to the elimination of
SECA revenues as of April 1, 2006 and a $3 million provision for
potential
SECA refunds pending settlement negotiations with various intervenors.
See
the “SECA Revenue Subject to Refund” section of Note 3 - Rate
Matters.
|
·
|
Other
revenues increased $9 million primarily due to higher gains on
sales of
emission allowances.
|
·
|
Other
Operation and Maintenance increased $16 million due to the 2005
establishment of a regulatory asset for PJM administrative fees,
an
increase in transmission expenses related to the AEP Transmission
Equalization Agreement and favorable adjustments in the prior year
related
to the corporate-owned life insurance policy.
|
·
|
Depreciation
and Amortization expense increased $27 million primarily due to
the 2005
RSP order that resulted in the reversal of unused shopping credits
of $18
million partially offset by the establishment of a $7 million regulatory
liability to benefit low-income customers and for economic development.
Depreciation expense also increased due to a greater depreciable
base
resulting primarily from the acquisitions of the Waterford Plant
and
Monongahela Power’s Ohio assets in the second half of
2005.
|
·
|
Taxes
Other Than Income Taxes increased $12 million due to increases
in real and
personal property taxes.
|
·
|
Carrying
Costs Income decreased $5 million primarily due to the completion
of
deferrals of the environmental carrying costs from 2004 and 2005
that are
now recovered during 2006 through 2008 according to
RSP.
|
·
|
Interest
Expense increased $6 million primarily due to a new long-term debt
issuance during the fourth quarter of
2005.
|
Moody’s
|
S&P
|
Fitch
|
|||
Senior
Unsecured Debt
|
A3
|
BBB
|
A-
|
MTM
Risk Management Contracts
|
Cash
Flow Hedges
|
|
|
DETM
Assignment (a)
|
|
|
Total
|
||||||
Current
Assets
|
$
|
42,197
|
$
|
10,989
|
$
|
-
|
$
|
53,186
|
|||||
Noncurrent
Assets
|
74,861
|
585
|
-
|
75,446
|
|||||||||
Total
MTM Derivative Contract Assets
|
117,058
|
11,574
|
-
|
128,632
|
|||||||||
Current
Liabilities
|
(31,803
|
)
|
(2,354
|
)
|
(952
|
)
|
(35,109
|
)
|
|||||
Noncurrent
Liabilities
|
(51,549
|
)
|
-
|
(6,108
|
)
|
(57,657
|
)
|
||||||
Total
MTM Derivative Contract Liabilities
|
(83,352
|
)
|
(2,354
|
)
|
(7,060
|
)
|
(92,766
|
)
|
|||||
Total
MTM Derivative Contract Net Assets (Liabilities)
|
$
|
33,706
|
$
|
9,220
|
$
|
(7,060
|
)
|
$
|
35,866
|
(a)
|
See
“Natural Gas Contracts with DETM” section of Note 17 of the 2005 Annual
Report.
|
Total
MTM Risk Management Contract Net Assets at December 31,
2005
|
$
|
33,322
|
||
(Gain)
Loss from Contracts Realized/Settled During the Period and Entered
in a
Prior Period
|
(4,894
|
)
|
||
Fair
Value of New Contracts at Inception When Entered During the Period
(a)
|
139
|
|||
Net
Option Premiums Paid/(Received) for Unexercised or Unexpired Option
Contracts Entered During the Period
|
(673
|
)
|
||
Change
in Fair Value Due to Valuation Methodology Changes on Forward
Contracts
|
364
|
|||
Changes
in Fair Value Due to Market Fluctuations During the Period
(b)
|
9,198
|
|||
Changes
Due to SIA (c)
|
(3,864
|
)
|
||
Changes
in Fair Value Allocated to Regulated Jurisdictions (d)
|
114
|
|||
Total
MTM Risk Management Contract Net Assets
|
33,706
|
|||
Net
Cash Flow Hedge Contracts
|
9,220
|
|||
DETM
Assignment (e)
|
(7,060
|
)
|
||
Total
MTM Risk Management Contract Net Assets at June 30,
2006
|
$
|
35,866
|
(a)
|
Most
of the fair value comes from longer term fixed price contracts
with
customers that seek 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)
|
See
“Allocation Agreement between AEP East companies and AEP West companies
and CSW Operating Agreement” section of Note 3.
|
(d)
|
“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.
|
(e)
|
See
“Natural Gas Contracts with DETM” section of Note 17 of the 2005 Annual
Report.
|
·
|
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 giving an indication
of
when these MTM amounts will settle and generate
cash.
|
|
Remainder
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
After
2010
|
|
|
Total
|
|||
Prices
Actively Quoted - Exchange Traded
Contracts
|
$
|
(2,051
|
)
|
$
|
2,293
|
$
|
2,348
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
2,590
|
|||||||
Prices
Provided by Other External Sources
- OTC Broker
Quotes
(a)
|
6,669
|
6,064
|
2,261
|
4,422
|
-
|
-
|
19,416
|
|||||||||||||||
Prices
Based on Models and Other Valuation
Methods (b)
|
178
|
618
|
1,714
|
2,434
|
5,146
|
1,610
|
11,700
|
|||||||||||||||
Total
|
$
|
4,796
|
$
|
8,975
|
$
|
6,323
|
$
|
6,856
|
$
|
5,146
|
$
|
1,610
|
$
|
33,706
|
(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 pricing
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.
|
|
Power
|
|||
Beginning
Balance in AOCI December 31, 2005
|
$
|
(859
|
)
|
|
Changes
in Fair Value
|
6,479
|
|||
Impact
due to Changes in SIA (a)
|
(261
|
)
|
||
Reclassifications
from AOCI to Net Income for Cash Flow
Hedges Settled
|
643
|
|||
Ending
Balance in AOCI June 30, 2006
|
$
|
6,002
|
(a)
|
See
“Allocation Agreement between AEP East companies and AEP West companies
and CSW Operating Agreement” section of Note
3.
|
Six
Months Ended
June
30, 2006
|
Twelve
Months Ended
December
31, 2005
|
||||||||||||||||
(in
thousands)
|
(in
thousands)
|
||||||||||||||||
End
|
High
|
Average
|
Low
|
End
|
High
|
Average
|
Low
|
||||||||||
$405
|
$948
|
$411
|
$237
|
$424
|
$705
|
$335
|
$121
|
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
||||
REVENUES
|
|||||||||||||
Electric
Generation, Transmission and Distribution
|
$
|
395,347
|
$
|
337,563
|
$
|
810,346
|
$
|
669,882
|
|||||
Sales
to AEP Affiliates
|
21,762
|
22,427
|
35,531
|
57,241
|
|||||||||
TOTAL
|
417,109
|
359,990
|
845,877
|
727,123
|
|||||||||
EXPENSES
|
|||||||||||||
Fuel
and Other Consumables for Electric Generation
|
71,213
|
52,203
|
141,033
|
118,638
|
|||||||||
Purchased
Electricity for Resale
|
27,688
|
8,703
|
52,453
|
17,906
|
|||||||||
Purchased
Electricity from AEP Affiliates
|
87,188
|
95,172
|
169,665
|
174,947
|
|||||||||
Other
Operation
|
57,866
|
53,328
|
113,827
|
96,557
|
|||||||||
Maintenance
|
23,502
|
26,700
|
41,436
|
42,084
|
|||||||||
Depreciation
and Amortization
|
46,534
|
27,333
|
92,346
|
65,531
|
|||||||||
Taxes
Other Than Income Taxes
|
41,787
|
32,993
|
81,289
|
69,235
|
|||||||||
TOTAL
|
355,778
|
296,432
|
692,049
|
584,898
|
|||||||||
OPERATING
INCOME
|
61,331
|
63,558
|
153,828
|
142,225
|
|||||||||
Other
Income (Expense):
|
|||||||||||||
Interest
Income
|
475
|
711
|
930
|
1,628
|
|||||||||
Carrying
Costs Income
|
1,320
|
4,159
|
2,036
|
6,916
|
|||||||||
Allowance
for Equity Funds Used During Construction
|
343
|
528
|
807
|
807
|
|||||||||
Interest
Expense
|
(16,914
|
)
|
(15,669
|
)
|
(34,434
|
)
|
(28,581
|
)
|
|||||
INCOME
BEFORE INCOME TAXES
|
46,555
|
53,287
|
123,167
|
122,995
|
|||||||||
Income
Tax Expense
|
14,293
|
18,636
|
39,568
|
40,876
|
|||||||||
NET
INCOME
|
32,262
|
34,651
|
83,599
|
82,119
|
|||||||||
Capital
Stock Expense
|
40
|
1,858
|
79
|
2,112
|
|||||||||
EARNINGS
APPLICABLE TO COMMON STOCK
|
$
|
32,222
|
$
|
32,793
|
$
|
83,520
|
$
|
80,007
|
The
common stock of CSPCo is wholly-owned by 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, 2004
|
$
|
41,026
|
$
|
577,415
|
$
|
341,025
|
$
|
(60,816
|
)
|
$
|
898,650
|
|||||
Common
Stock Dividends
|
(57,000
|
)
|
(57,000
|
)
|
||||||||||||
Capital
Stock Expense
|
2,112
|
(2,112
|
)
|
-
|
||||||||||||
TOTAL
|
841,650
|
|||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||
Other
Comprehensive Loss, Net of Taxes:
|
||||||||||||||||
Cash
Flow Hedges, Net of Tax of $2,307
|
(4,285
|
)
|
(4,285
|
)
|
||||||||||||
NET
INCOME
|
82,119
|
82,119
|
||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
77,834
|
|||||||||||||||
JUNE
30, 2005
|
$
|
41,026
|
$
|
579,527
|
$
|
364,032
|
$
|
(65,101
|
)
|
$
|
919,484
|
|||||
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
|
2006
|
|
|
2005
|
||||
CURRENT
ASSETS
|
|||||||
Cash
and Cash Equivalents
|
$
|
810
|
$
|
940
|
|||
Advances
to Affiliates
|
12,616
|
-
|
|||||
Accounts
Receivable:
|
|||||||
Customers
|
52,106
|
43,143
|
|||||
Affiliated
Companies
|
30,840
|
67,694
|
|||||
Accrued
Unbilled Revenues
|
8,361
|
10,086
|
|||||
Miscellaneous
|
2,592
|
2,012
|
|||||
Allowance
for Uncollectible Accounts
|
(1,320
|
)
|
(1,082
|
)
|
|||
Total Accounts Receivable
|
92,579
|
121,853
|
|||||
Fuel
|
40,277
|
28,579
|
|||||
Materials
and Supplies
|
30,485
|
27,519
|
|||||
Emission
Allowances
|
11,283
|
20,181
|
|||||
Risk
Management Assets
|
53,186
|
76,507
|
|||||
Accrued
Tax Benefits
|
4,360
|
36,838
|
|||||
Margin
Deposits
|
584
|
16,832
|
|||||
Prepayments
and Other
|
8,529
|
6,714
|
|||||
TOTAL
|
254,709
|
335,963
|
|||||
PROPERTY,
PLANT AND EQUIPMENT
|
|||||||
Electric:
|
|||||||
Production
|
1,883,890
|
1,874,652
|
|||||
Transmission
|
470,586
|
457,937
|
|||||
Distribution
|
1,441,468
|
1,380,722
|
|||||
Other
|
186,456
|
184,096
|
|||||
Construction
Work in Progress
|
179,675
|
129,246
|
|||||
Total
|
4,162,075
|
4,026,653
|
|||||
Accumulated
Depreciation and Amortization
|
1,564,597
|
1,500,858
|
|||||
TOTAL
- NET
|
2,597,478
|
2,525,795
|
|||||
OTHER
NONCURRENT ASSETS
|
|||||||
Regulatory
Assets
|
223,554
|
231,599
|
|||||
Long-term
Risk Management Assets
|
75,446
|
101,512
|
|||||
Deferred
Charges and Other
|
208,185
|
237,925
|
|||||
TOTAL
|
507,185
|
571,036
|
|||||
TOTAL
ASSETS
|
$
|
3,359,372
|
$
|
3,432,794
|
2006
|
|
|
2005
|
||||
CURRENT
LIABILITIES
|
(in
thousands)
|
||||||
Advances
from Affiliates
|
$
|
-
|
$
|
17,609
|
|||
Accounts
Payable:
|
|||||||
General
|
85,945
|
59,134
|
|||||
Affiliated
Companies
|
50,801
|
59,399
|
|||||
Risk
Management Liabilities
|
35,109
|
69,036
|
|||||
Customer
Deposits
|
32,170
|
47,013
|
|||||
Accrued
Taxes
|
103,342
|
157,729
|
|||||
Accrued
Interest
|
19,395
|
18,908
|
|||||
Other
|
29,772
|
31,321
|
|||||
TOTAL
|
356,534
|
460,149
|
|||||
NONCURRENT
LIABILITIES
|
|||||||
Long-term
Debt - Nonaffiliated
|
1,097,121
|
1,096,920
|
|||||
Long-term
Debt - Affiliated
|
100,000
|
100,000
|
|||||
Long-term
Risk Management Liabilities
|
57,657
|
84,291
|
|||||
Deferred
Income Taxes
|
501,286
|
498,232
|
|||||
Regulatory
Liabilities and Deferred Investment Tax Credits
|
173,058
|
165,344
|
|||||
Deferred
Credits and Other
|
46,710
|
46,312
|
|||||
TOTAL
|
1,975,832
|
1,991,099
|
|||||
TOTAL
LIABILITIES
|
2,332,366
|
2,451,248
|
|||||
Commitments
and Contingencies (Note 5)
|
|||||||
COMMON
SHAREHOLDER’S EQUITY
|
|||||||
Common
Stock - No Par Value Per Share:
|
|||||||
Authorized
- 24,000,000 Shares
|
|||||||
Outstanding
- 16,410,426 Shares
|
41,026
|
41,026
|
|||||
Paid-in
Capital
|
580,114
|
580,035
|
|||||
Retained
Earnings
|
399,885
|
361,365
|
|||||
Accumulated
Other Comprehensive Income (Loss)
|
5,981
|
(880
|
)
|
||||
TOTAL
|
1,027,006
|
981,546
|
|||||
TOTAL
LIABILITIES AND SHAREHOLDER’S EQUITY
|
$
|
3,359,372
|
$
|
3,432,794
|
2006
|
|
|
2005
|
||||
OPERATING
ACTIVITIES
|
|||||||
Net
Income
|
$
|
83,599
|
$
|
82,119
|
|||
Adjustments
for Noncash Items:
|
|||||||
Depreciation
and Amortization
|
92,346
|
65,531
|
|||||
Deferred
Income Taxes
|
(250
|
)
|
(1,593
|
)
|
|||
Mark-to-Market
of Risk Management Contracts
|
(466
|
)
|
(5,171
|
)
|
|||
Deferred
Property Taxes
|
30,201
|
32,210
|
|||||
Change
in Other Noncurrent Assets
|
(17,206
|
)
|
(55,746
|
)
|
|||
Change
in Other Noncurrent Liabilities
|
7,111
|
4,287
|
|||||
Changes
in Components of Working Capital:
|
|||||||
Accounts
Receivable, Net
|
29,274
|
21,688
|
|||||
Fuel,
Materials and Supplies
|
(14,664
|
)
|
(2,493
|
)
|
|||
Accounts
Payable
|
16,866
|
(1,220
|
)
|
||||
Accrued
Taxes, Net
|
(21,909
|
)
|
(93,089
|
)
|
|||
Customer
Deposits
|
(14,843
|
)
|
7,618
|
||||
Other
Current Assets
|
24,796
|
334
|
|||||
Other
Current Liabilities
|
(1,062
|
)
|
948
|
||||
Net
Cash Flows From Operating Activities
|
213,793
|
55,423
|
|||||
INVESTING
ACTIVITIES
|
|||||||
Construction
Expenditures
|
(137,728
|
)
|
(79,013
|
)
|
|||
Change
in Advances to Affiliates, Net
|
(12,616
|
)
|
79,378
|
||||
Other
|
600
|
3,663
|
|||||
Net
Cash Flows From (Used For) Investing Activities
|
(149,744
|
)
|
4,028
|
||||
FINANCING
ACTIVITIES
|
|||||||
Change
in Advances from Affiliates, Net
|
(17,609
|
)
|
-
|
||||
Principal
Payments for Capital Lease Obligations
|
(1,570
|
)
|
(1,815
|
)
|
|||
Dividends
Paid on Common Stock
|
(45,000
|
)
|
(57,000
|
)
|
|||
Net
Cash Flows Used For Financing Activities
|
(64,179
|
)
|
(58,815
|
)
|
|||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
(130
|
)
|
636
|
||||
Cash
and Cash Equivalents at Beginning of Period
|
940
|
58
|
|||||
Cash
and Cash Equivalents at End of Period
|
$
|
810
|
$
|
694
|
|||
SUPPLEMENTARY
INFORMATION
|
|||||||
Cash
Paid for Interest, Net of Capitalized Amounts
|
$
|
32,374
|
$
|
27,390
|
|||
Cash
Paid for Income Taxes, Net of Refunds
|
10,713
|
78,019
|
|||||
Noncash
Acquisitions Under Capital Leases
|
1,648
|
343
|
|||||
Construction
Expenditures Included in Accounts Payable at June 30,
|
12,601
|
4,426
|
|||||
See
Condensed Notes to Condensed Financial Statements of Registrant
Subsidiaries.
|
Footnote
Reference
|
|
Significant
Accounting Matters
|
Note
1
|
New
Accounting Pronouncements
|
Note
2
|
Rate
Matters
|
Note
3
|
Customer
Choice and Industry Restructuring
|
Note
4
|
Commitments
and Contingencies
|
Note
5
|
Guarantees
|
Note
6
|
Company-wide
Staffing and Budget Review
|
Note
7
|
Benefit
Plans
|
Note
9
|
Business
Segments
|
Note
11
|
Financing
Activities
|
Note
12
|
Second
Quarter of 2005
|
$
|
36
|
|||||
Changes
in Gross Margin:
|
|||||||
Retail
Margins
|
(18
|
)
|
|||||
Off-system
Sales (a)
|
16
|
||||||
Transmission
Revenues
|
(9
|
)
|
|||||
Other
|
(4
|
)
|
|||||
Total
Change in Gross Margin
|
(15
|
)
|
|||||
Changes
in Operating Expenses and Other:
|
|||||||
Other
Operation and Maintenance
|
8
|
||||||
Depreciation
and Amortization
|
(2
|
)
|
|||||
Taxes
Other Than Income Taxes
|
(3
|
)
|
|||||
Interest
Expense
|
(1
|
)
|
|||||
Total
Change in Operating Expenses and Other
|
2
|
||||||
Income
Tax Expense
|
6
|
||||||
Second
Quarter of 2006
|
$
|
29
|
(a)
|
Includes
firm wholesale sales to municipals and
cooperatives.
|
·
|
Retail
Margins decreased $18 million primarily due to lower fuel recovery
as fuel
cost increases could not be recovered due to the Indiana fuel cap
and a
reduction in capacity settlement revenues of $8 million under the
Interconnection Agreement.
|
·
|
Off-system
Sales increased $16 million primarily due to the addition of new
municipal
contracts including new rates and increased demand beginning January
2006.
|
·
|
Transmission
Revenues decreased $9 million primarily due to the elimination
of SECA
revenues as of April 1, 2006 and a $3 million provision for potential
SECA
refunds pending settlement negotiations with various intervenors.
See the
“SECA Revenue Subject to Refund” section of Note 3 - Rate
Matters.
|
·
|
Other Operation
and Maintenance expenses decreased $8 million primarily due to
a reduction
in maintenance expenses for coal and nuclear generation
facilities.
|
Six
Months Ended June 30, 2005
|
$
|
75
|
|||||
Changes
in Gross Margin:
|
|||||||
Retail
Margins
|
(11
|
)
|
|||||
Off-system
Sales (a)
|
29
|
||||||
Transmission
Revenues
|
(7
|
)
|
|||||
Other
|
9
|
||||||
Total
Change in Gross Margin
|
20
|
||||||
Changes
in Operating Expenses and Other:
|
|||||||
Other
Operation and Maintenance
|
5
|
||||||
Depreciation
and Amortization
|
(4
|
)
|
|||||
Taxes
Other Than Income Taxes
|
(3
|
)
|
|||||
Other
Income (Expense), Net
|
(2
|
)
|
|||||
Total
Change in Operating Expenses and Other
|
(4
|
)
|
|||||
Income
Tax Expense
|
(5
|
)
|
|||||
Six
Months Ended June 30, 2006
|
$
|
86
|
(a)
|
Includes
firm wholesale sales to municipals and
cooperatives.
|
·
|
Retail
Margins decreased $11 million primarily due to lower fuel recovery
as fuel
cost increases could not be recovered due to the Indiana fuel cap
and a
reduction in capacity settlement revenues of $5 million under the
Interconnection Agreement.
|
·
|
Off-system
Sales increased $29 million primarily due to the addition of new
municipal
contracts including new rates and increased demand beginning January
2006.
|
·
|
Transmission
Revenues decreased $7 million primarily due to the elimination
of SECA
revenues as of April 1, 2006 and a $3 million provision for potential
SECA
refunds pending settlement negotiations with various intervenors.
See the
“SECA Revenue Subject to Refund” section of Note 3 - Rate
Matters.
|
·
|
Other increased
$9 million primarily due to increased River Transportation Division
(RTD)
revenues for barging coal and gains on sales of emission allowances.
Related expenses which offset the RTD revenue increase are included
in
Other Operation on the Condensed Consolidated Statements of Income
resulting in our earning only a return approved under regulatory
order.
|
·
|
Other Operation
and Maintenance expenses decreased $5 million primarily due to
a reduction
in distribution maintenance expense. Prior year distribution maintenance
expense for overhead power lines included the costs of a January
2005 ice
storm.
|
Moody’s
|
S&P
|
Fitch
|
|||
Senior
Unsecured Debt
|
Baa2
|
BBB
|
BBB
|
2006
|
2005
|
||||||
(in
thousands)
|
|||||||
Cash
and Cash Equivalents at Beginning of Period
|
$
|
854
|
$
|
511
|
|||
Net
Cash Flows From (Used For):
|
|||||||
Operating
Activities
|
291,722
|
123,693
|
|||||
Investing
Activities
|
(232,525
|
)
|
(159,964
|
)
|
|||
Financing
Activities
|
(59,517
|
)
|
36,298
|
||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
(320
|
)
|
27
|
||||
Cash
and Cash Equivalents at End of Period
|
$
|
534
|
$
|
538
|
Principal
Amount
|
Interest
|
Due
|
|||||
Type
of Debt
|
Rate
|
Date
|
|||||
(in
thousands)
|
(%)
|
||||||
Pollution
Control Bonds
|
$
|
50,000
|
Variable
|
2025
|
Principal
Amount
Paid
|
Interest
|
Due
|
|||||
Type
of Debt
|
Rate
|
Date
|
|||||
(in
thousands)
|
(%)
|
||||||
Pollution
Control Bonds
|
$
|
50,000
|
6.55
|
2025
|
MTM
Risk Management Contracts
|
Cash
Flow &
Fair
Value Hedges
|
DETM
Assignment (a)
|
Total
|
||||||||||
Current
Assets
|
$
|
43,070
|
$
|
13,934
|
$
|
-
|
$
|
57,004
|
|||||
Noncurrent
Assets
|
76,447
|
597
|
-
|
77,044
|
|||||||||
Total
MTM Derivative Contract Assets
|
119,517
|
14,531
|
-
|
134,048
|
|||||||||
Current
Liabilities
|
(32,426
|
)
|
(3,126
|
)
|
(972
|
)
|
(36,524
|
)
|
|||||
Noncurrent
Liabilities
|
(52,608
|
)
|
-
|
(6,239
|
)
|
(58,847
|
)
|
||||||
Total
MTM Derivative Contract Liabilities
|
(85,034
|
)
|
(3,126
|
)
|
(7,211
|
)
|
(95,371
|
)
|
|||||
Total
MTM Derivative Contract Net Assets (Liabilities)
|
$
|
34,483
|
$
|
11,405
|
$
|
(7,211
|
)
|
$
|
38,677
|
(a)
|
See
“Natural Gas Contracts with DETM” section of Note 17 of the 2005 Annual
Report.
|
Total
MTM Risk Management Contract Net Assets at December 31,
2005
|
$
|
33,932
|
||
(Gain)
Loss from Contracts Realized/Settled During the Period and Entered
in a
Prior Period
|
1,321
|
|||
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
|
(682
|
)
|
||
Change
in Fair Value Due to Valuation Methodology Changes on Forward
Contracts
|
-
|
|||
Changes
in Fair Value Due to Market Fluctuations During the Period
(b)
|
(1,356
|
)
|
||
Changes
Due to SIA (c)
|
(3,940
|
)
|
||
Changes
in Fair Value Allocated to Regulated Jurisdictions (d)
|
5,208
|
|||
Total
MTM Risk Management Contract Net Assets
|
34,483
|
|||
Net
Cash Flow & Fair Value Hedge Contracts
|
11,405
|
|||
DETM
Assignment (e)
|
(7,211
|
)
|
||
Total
MTM Risk Management Contract Net Assets at June 30,
2006
|
$
|
38,677
|
(a)
|
Most
of the fair value comes from longer term fixed price contracts
with
customers that seek 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)
|
See
“Allocation Agreement between AEP East companies and AEP West companies
and CSW Operating Agreement” section of Note 3.
|
(d)
|
“Changes
in Fair Value Allocated to Regulated Jurisdictions” relates to the net
gains (losses) of those contracts that are not reflected in our
Condensed
Consolidated Statements of Income. These net gains (losses) are
recorded
as regulatory liabilities/assets for those subsidiaries that operate
in
regulated jurisdictions.
|
(e)
|
See
“Natural Gas Contracts with DETM” section of Note 17 of the 2005 Annual
Report.
|
·
|
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 giving an indication
of
when these MTM amounts will settle and generate
cash.
|
Remainder
2006
|
2007
|
2008
|
2009
|
2010
|
After
2010
|
Total
|
||||||||||||||||
Prices
Actively Quoted - Exchange Traded
Contracts
|
$
|
(2,096
|
)
|
$
|
2,343
|
$
|
2,398
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
2,645
|
|||||||
Prices
Provided by Other External Sources
- OTC Broker Quotes (a)
|
6,816
|
6,201
|
2,308
|
4,517
|
-
|
-
|
19,842
|
|||||||||||||||
Prices
Based on Models and Other Valuation
Methods (b)
|
183
|
660
|
1,766
|
2,487
|
5,256
|
1,644
|
11,996
|
|||||||||||||||
Total
|
$
|
4,903
|
$
|
9,204
|
$
|
6,472
|
$
|
7,004
|
$
|
5,256
|
$
|
1,644
|
$
|
34,483
|
(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 pricing
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.
|
Power
|
Interest
Rate
|
Total
|
||||||||
Beginning
Balance in AOCI December 31, 2005
|
$
|
(877
|
)
|
$
|
(2,590
|
)
|
$
|
(3,467
|
)
|
|
Changes
in Fair Value
|
6,619
|
1,532
|
8,151
|
|||||||
Impact
due to Changes in SIA (a)
|
(267
|
)
|
-
|
(267
|
)
|
|||||
Reclassifications
from AOCI to Net Income for Cash Flow
Hedges Settled
|
657
|
160
|
817
|
|||||||
Ending
Balance in AOCI June 30, 2006
|
$
|
6,132
|
$
|
(898
|
)
|
$
|
5,234
|
(a)
|
See
“Allocation Agreement between AEP East companies and AEP West companies
and CSW Operating Agreement” section of Note
3.
|
Six
Months Ended
June
30, 2006
|
Twelve
Months Ended
December
31, 2005
|
||||||||||||||||
(in
thousands)
|
(in
thousands)
|
||||||||||||||||
End
|
High
|
Average
|
Low
|
End
|
High
|
Average
|
Low
|
||||||||||
$414
|
$968
|
$420
|
$242
|
$433
|
$720
|
$343
|
$124
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
REVENUES
|
|||||||||||||
Electric
Generation, Transmission and Distribution
|
$
|
371,581
|
$
|
355,907
|
$
|
775,350
|
$
|
704,260
|
|||||
Sales
to AEP Affiliates
|
80,401
|
81,544
|
168,935
|
174,082
|
|||||||||
Other
- Affiliated
|
9,841
|
12,131
|
24,935
|
22,470
|
|||||||||
Other
- Nonaffiliated
|
7,631
|
7,978
|
16,013
|
14,307
|
|||||||||
TOTAL
|
469,454
|
457,560
|
985,233
|
915,119
|
|||||||||
EXPENSES
|
|||||||||||||
Fuel
and Other Consumables for Electric Generation
|
96,147
|
80,461
|
185,599
|
159,698
|
|||||||||
Purchased
Electricity for Resale
|
15,533
|
12,730
|
26,543
|
24,002
|
|||||||||
Purchased
Electricity from AEP Affiliates
|
80,830
|
71,984
|
167,252
|
145,993
|
|||||||||
Other
Operation
|
115,506
|
115,910
|
232,712
|
220,312
|
|||||||||
Maintenance
|
40,352
|
48,366
|
85,571
|
102,688
|
|||||||||
Depreciation
and Amortization
|
44,660
|
42,224
|
88,786
|
84,969
|
|||||||||
Taxes
Other Than Income Taxes
|
18,965
|
16,296
|
37,871
|
34,978
|
|||||||||
TOTAL
|
411,993
|
387,971
|
824,334
|
772,640
|
|||||||||
OPERATING
INCOME
|
57,461
|
69,589
|
160,899
|
142,479
|
|||||||||
Other
Income (Expense):
|
|||||||||||||
Interest
Income
|
663
|
418
|
1,357
|
851
|
|||||||||
Allowance
for Equity Funds Used During Construction
|
1,440
|
1,040
|
3,364
|
2,689
|
|||||||||
Interest
Expense
|
(17,902
|
)
|
(16,478
|
)
|
(35,435
|
)
|
(32,084
|
)
|
|||||
INCOME
BEFORE INCOME TAXES
|
41,662
|
54,569
|
130,185
|
113,935
|
|||||||||
Income
Tax Expense
|
13,137
|
18,976
|
43,782
|
38,673
|
|||||||||
NET
INCOME
|
28,525
|
35,593
|
86,403
|
75,262
|
|||||||||
Preferred
Stock Dividend Requirements including Capital Stock Expense
|
85
|
107
|
170
|
225
|
|||||||||
EARNINGS
APPLICABLE TO COMMON STOCK
|
$
|
28,440
|
$
|
35,486
|
$
|
86,233
|
$
|
75,037
|
Common
Stock
|
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other Comprehensive Income (Loss)
|
Total
|
||||||||||||
DECEMBER
31, 2004
|
$
|
56,584
|
$
|
858,835
|
$
|
221,330
|
$
|
(45,251
|
)
|
$
|
1,091,498
|
|||||
Common
Stock Dividends
|
(42,000
|
)
|
(42,000
|
)
|
||||||||||||
Preferred
Stock Dividends
|
(169
|
)
|
(169
|
)
|
||||||||||||
Capital
Stock Expense and Other
|
2,455
|
(56
|
)
|
2,399
|
||||||||||||
TOTAL
|
1,051,728
|
|||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||
Other
Comprehensive Loss, Net of Taxes:
|
||||||||||||||||
Cash
Flow Hedges, Net of Tax of $2,527
|
(4,692
|
)
|
(4,692
|
)
|
||||||||||||
NET
INCOME
|
75,262
|
75,262
|
||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
70,570
|
|||||||||||||||
JUNE
30, 2005
|
$
|
56,584
|
$
|
861,290
|
$
|
254,367
|
$
|
(49,943
|
)
|
$
|
1,122,298
|
|||||
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
|
2006
|
2005
|
||||||
CURRENT
ASSETS
|
|||||||
Cash
and Cash Equivalents
|
$
|
534
|
$
|
854
|
|||
Accounts
Receivable:
|
|||||||
Customers
|
61,036
|
62,614
|
|||||
Affiliated
Companies
|
72,909
|
127,981
|
|||||
Miscellaneous
|
1,928
|
1,982
|
|||||
Allowance
for Uncollectible Accounts
|
(1,088
|
)
|
(898
|
)
|
|||
Total
Accounts Receivable
|
134,785
|
191,679
|
|||||
Fuel
|
32,333
|
25,894
|
|||||
Materials
and Supplies
|
123,692
|
118,039
|
|||||
Risk
Management Assets
|
57,004
|
78,134
|
|||||
Accrued
Tax Benefits
|
27,467
|
51,846
|
|||||
Prepayments
and Other
|
6,031
|
31,303
|
|||||
TOTAL
|
381,846
|
497,749
|
|||||
PROPERTY,
PLANT AND EQUIPMENT
|
|||||||
Electric:
|
|||||||
Production
|
3,216,765
|
3,128,078
|
|||||
Transmission
|
1,033,311
|
1,028,496
|
|||||
Distribution
|
1,073,159
|
1,029,498
|
|||||
Other
(including nuclear fuel and coal mining)
|
478,450
|
465,130
|
|||||
Construction
Work in Progress
|
288,913
|
311,080
|
|||||
Total
|
6,090,598
|
5,962,282
|
|||||
Accumulated
Depreciation, Depletion and Amortization
|
2,875,115
|
2,822,558
|
|||||
TOTAL
- NET
|
3,215,483
|
3,139,724
|
|||||
OTHER
NONCURRENT ASSETS
|
|||||||
Regulatory
Assets
|
209,751
|
222,686
|
|||||
Nuclear
Decommissioning and Spent Nuclear Fuel Disposal Trust
Funds
|
1,158,538
|
1,133,567
|
|||||
Long-term
Risk Management Assets
|
77,044
|
103,645
|
|||||
Deferred
Charges and Other
|
159,570
|
164,938
|
|||||
TOTAL
|
1,604,903
|
1,624,836
|
|||||
TOTAL
ASSETS
|
$
|
5,202,232
|
$
|
5,262,309
|
2006
|
2005
|
||||||
CURRENT
LIABILITIES
|
(in
thousands)
|
||||||
Advances
from Affiliates
|
$
|
57,749
|
$
|
93,702
|
|||
Accounts
Payable:
|
|||||||
General
|
135,405
|
139,334
|
|||||
Affiliated
Companies
|
49,742
|
60,324
|
|||||
Long-term
Debt Due Within One Year
|
414,632
|
364,469
|
|||||
Risk
Management Liabilities
|
36,524
|
71,032
|
|||||
Customer
Deposits
|
34,391
|
49,258
|
|||||
Accrued
Taxes
|
60,444
|
56,567
|
|||||
Other
|
92,317
|
112,839
|
|||||
TOTAL
|
881,204
|
947,525
|
|||||
NONCURRENT
LIABILITIES
|
|||||||
Long-term
Debt
|
1,036,038
|
1,080,471
|
|||||
Long-term
Risk Management Liabilities
|
58,847
|
86,159
|
|||||
Deferred
Income Taxes
|
349,595
|
335,264
|
|||||
Regulatory
Liabilities and Deferred Investment Tax Credits
|
684,865
|
710,015
|
|||||
Asset
Retirement Obligations
|
761,890
|
737,959
|
|||||
Deferred
Credits and Other
|
126,683
|
136,740
|
|||||
TOTAL
|
3,017,918
|
3,086,608
|
|||||
TOTAL
LIABILITIES
|
3,899,122
|
4,034,133
|
|||||
Cumulative
Preferred Stock Not Subject to Mandatory Redemption
|
8,084
|
8,084
|
|||||
Commitments
and Contingencies (Note 5)
|
|||||||
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
|
861,290
|
861,290
|
|||||
Retained
Earnings
|
372,020
|
305,787
|
|||||
Accumulated
Other Comprehensive Income (Loss)
|
5,132
|
(3,569
|
)
|
||||
TOTAL
|
1,295,026
|
1,220,092
|
|||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
5,202,232
|
$
|
5,262,309
|
2006
|
2005
|
||||||
OPERATING
ACTIVITIES
|
|||||||
Net
Income
|
$
|
86,403
|
$
|
75,262
|
|||
Adjustments
for Noncash Items:
|
|||||||
Depreciation
and Amortization
|
88,786
|
84,969
|
|||||
Accretion
of Asset Retirement Obligations
|
24,009
|
23,632
|
|||||
Deferred
Income Taxes
|
9,562
|
3,476
|
|||||
Deferred
Investment Tax Credits
|
(3,640
|
)
|
(3,664
|
)
|
|||
Amortization
(Deferral) of Incremental Nuclear Refueling Outage Expenses,
Net
|
(12,111
|
)
|
(758
|
)
|
|||
Amortization
of Nuclear Fuel
|
24,928
|
27,234
|
|||||
Mark-to-Market
of Risk Management Contracts
|
(634
|
)
|
(5,598
|
)
|
|||
Pension
Contributions to Qualified Plan Trusts
|
-
|
(30,701
|
)
|
||||
Change
in Other Noncurrent Assets
|
20,953
|
12,660
|
|||||
Change
in Other Noncurrent Liabilities
|
(9,308
|
)
|
2,533
|
||||
Changes
in Components of Working Capital:
|
|||||||
Accounts
Receivable, Net
|
56,894
|
25,058
|
|||||
Fuel,
Materials and Supplies
|
(12,092
|
)
|
561
|
||||
Accounts
Payable
|
4,221
|
(11,426
|
)
|
||||
Accrued
Taxes, Net
|
28,256
|
(68,896
|
)
|
||||
Customer
Deposits
|
(14,867
|
)
|
5,713
|
||||
Other
Current Assets
|
21,921
|
(3,646
|
)
|
||||
Other
Current Liabilities
|
(21,559
|
)
|
(12,716
|
)
|
|||
Net
Cash Flows From Operating Activities
|
291,722
|
123,693
|
|||||
INVESTING
ACTIVITIES
|
|||||||
Construction
Expenditures
|
(169,491
|
)
|
(119,709
|
)
|
|||
Change
in Advances to Affiliates, Net
|
-
|
5,093
|
|||||
Purchases
of Investment Securities
|
(434,212
|
)
|
(299,692
|
)
|
|||
Sales
of Investment Securities
|
405,716
|
272,654
|
|||||
Acquisitions
of Nuclear Fuel
|
(35,195
|
)
|
(27,778
|
)
|
|||
Proceeds
from Sales of Assets
|
657
|
9,468
|
|||||
Net
Cash Flows Used For Investing Activities
|
(232,525
|
)
|
(159,964
|
)
|
|||
FINANCING
ACTIVITIES
|
|||||||
Issuance
of Long-term Debt
|
49,745
|
-
|
|||||
Change
in Advances from Affiliates, Net
|
(35,953
|
)
|
143,126
|
||||
Retirement
of Long-term Debt
|
(50,000
|
)
|
-
|
||||
Retirement
of Cumulative Preferred Stock
|
-
|
(61,445
|
)
|
||||
Principal
Payments for Capital Lease Obligations
|
(3,139
|
)
|
(3,214
|
)
|
|||
Dividends
Paid on Common Stock
|
(20,000
|
)
|
(42,000
|
)
|
|||
Dividends
Paid on Cumulative Preferred Stock
|
(170
|
)
|
(169
|
)
|
|||
Net
Cash Flows From (Used For) Financing Activities
|
(59,517
|
)
|
36,298
|
||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
(320
|
)
|
27
|
||||
Cash
and Cash Equivalents at Beginning of Period
|
854
|
511
|
|||||
Cash
and Cash Equivalents at End of Period
|
$
|
534
|
$
|
538
|
|||
SUPPLEMENTAL
DISCLOSURE
|
|||||||
Cash
Paid for Interest, Net of Capitalized Amounts
|
$
|
32,959
|
$
|
29,427
|
|||
Cash
Paid for Income Taxes, Net of Refunds
|
12,031
|
106,891
|
|||||
Noncash
Acquisitions Under Capital Leases
|
3,185
|
652
|
|||||
Construction
Expenditures Included in Accounts Payable at June 30,
|
18,031
|
14,640
|
|||||
Acquisition
of Nuclear Fuel in Accounts Payable at June 30,
|
25,780
|
-
|
|||||
See
Condensed Notes to Condensed Financial Statements of Registrant
Subsidiaries.
|
Footnote
Reference
|
|
Significant
Accounting Matters
|
Note
1
|
New
Accounting Pronouncements
|
Note
2
|
Rate
Matters
|
Note
3
|
Commitments
and Contingencies
|
Note
5
|
Guarantees
|
Note
6
|
Company-wide
Staffing and Budget Review
|
Note
7
|
Benefit
Plans
|
Note
9
|
Business
Segments
|
Note
11
|
Financing
Activities
|
Note
12
|
Second
Quarter of 2005
|
$
|
2
|
|||||
Changes
in Gross Margin:
|
|||||||
Retail
Margins
|
10
|
||||||
Off-system
Sales
|
1
|
||||||
Transmission
Revenues
|
(4
|
)
|
|||||
Other
|
(2
|
)
|
|||||
Total
Change in Gross Margin
|
5
|
||||||
Total
Change in Operating Expenses and Other
|
(1
|
)
|
|||||
Income
Tax Expense
|
(1
|
)
|
|||||
Second
Quarter of 2006
|
$
|
5
|
|||||
·
|
Retail
Margins increased $10 million primarily due to rate relief from
the March
2006 approval of the settlement agreement in our base rate case.
|
·
|
Transmission
Revenues decreased $4 million primarily due to the elimination
of SECA
revenues as of April 1, 2006 and a $1 million provision for potential
SECA
refunds pending settlement negotiations with various intervenors.
See the
“SECA Revenue Subject to Refund” section of Note 3 - Rate
Matters.
|
Six
Months Ended June 30, 2005
|
$
|
12
|
|||||
Changes
in Gross Margin:
|
|||||||
Retail
Margins
|
6
|
||||||
Off-system
Sales
|
1
|
||||||
Transmission
Revenues
|
(3
|
)
|
|||||
Other
|
3
|
||||||
Total
Change in Gross Margin
|
7
|
||||||
Changes
in Operating Expenses and Other:
|
|||||||
Other
Operation and Maintenance
|
(1
|
)
|
|||||
Depreciation
and Amortization
|
(1
|
)
|
|||||
Total
Change in Operating Expenses and Other
|
(2
|
)
|
|||||
Income
Tax Expense
|
(2
|
)
|
|||||
Six
Months Ended June 30, 2006
|
$
|
15
|
|||||
·
|
Retail
Margins increased $6 million primarily due to rate relief from
the March
2006 approval of the settlement agreement in our base rate case
as well as
favorable financial transmission rights revenue. The above was
partially
offset by increased capacity charges due to changes in the relative
peak
demands and generating capacity of the AEP Power Pool
members.
|
·
|
Transmission
Revenues decreased $3 million primarily due to the elimination
of SECA
revenues as of April 1, 2006 and a $1 million provision for potential
SECA
refunds pending settlement negotiations with various intervenors.
See the
“SECA Revenue Subject to Refund” section of Note 3 - Rate
Matters.
|
·
|
Other
revenues increased
$3 million due primarily to a $3 million unfavorable adjustment
of the
Demand Side Management Program regulatory asset in March
2005.
|
Moody’s
|
S&P
|
Fitch
|
|||
Senior
Unsecured Debt
|
Baa2
|
BBB
|
BBB
|
Principal
|
Interest
|
Due
|
||||||||
Type
of Debt
|
Amount
|
Rate
|
Date
|
|||||||
(in
thousands)
|
(%)
|
|||||||||
Notes
Payable-Affiliated
|
$
|
40,000
|
6.501
|
2006
|
MTM
Risk Management Contracts
|
Cash
Flow &
Fair
Value Hedges
|
DETM
Assignment (a)
|
Total
|
||||||||||
Current
Assets
|
$
|
17,224
|
$
|
4,457
|
$
|
-
|
$
|
21,681
|
|||||
Noncurrent
Assets
|
30,424
|
237
|
-
|
30,661
|
|||||||||
Total
MTM Derivative Contract Assets
|
47,648
|
4,694
|
-
|
52,342
|
|||||||||
Current
Liabilities
|
(13,106
|
)
|
(1,671
|
)
|
(386
|
)
|
(15,163
|
)
|
|||||
Noncurrent
Liabilities
|
(21,068
|
)
|
(484
|
)
|
(2,477
|
)
|
(24,029
|
)
|
|||||
Total
MTM Derivative Contract Liabilities
|
(34,174
|
)
|
(2,155
|
)
|
(2,863
|
)
|
(39,192
|
)
|
|||||
Total
MTM Derivative Contract Net Assets (Liabilities)
|
$
|
13,474
|
$
|
2,539
|
$
|
(2,863
|
)
|
$
|
13,150
|
(a)
|
See
“Natural Gas Contracts with DETM” section of Note 17 of the 2005 Annual
Report.
|
Total
MTM Risk Management Contract Net Assets at December 31,
2005
|
$
|
13,518
|
||
(Gain)
Loss from Contracts Realized/Settled During the Period and Entered
in a
Prior Period
|
681
|
|||
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
|
(290
|
)
|
||
Change
in Fair Value Due to Valuation Methodology Changes on Forward
Contracts
|
-
|
|||
Changes
in Fair Value Due to Market Fluctuations During the Period
(b)
|
(688
|
)
|
||
Changes
Due to SIA (c)
|
(1,565
|
)
|
||
Changes
in Fair Value Allocated to Regulated Jurisdictions (d)
|
1,818
|
|||
Total
MTM Risk Management Contract Net Assets
|
13,474
|
|||
Net
Cash Flow & Fair Value Hedge Contracts
|
2,539
|
|||
DETM
Assignment (e)
|
(2,863
|
)
|
||
Total
MTM Risk Management Contract Net Assets at June 30, 2006
|
$
|
13,150
|
(a)
|
Most
of the fair value comes from longer term fixed price contracts
with
customers that seek 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)
|
See
“Allocation Agreement between AEP East companies and AEP West companies
and CSW Operating Agreement” section of Note 3.
|
(d)
|
“Changes
in Fair Value Allocated to Regulated Jurisdictions” relates to the net
gains (losses) of those contracts that are not reflected in the
Condensed
Statements of Income. These net gains (losses) are recorded as
regulatory
liabilities/assets for those subsidiaries that operate in regulated
jurisdictions.
|
(e)
|
See
“Natural Gas Contracts with DETM” section of Note 17 of the 2005 Annual
Report.
|
·
|
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 giving an indication
of
when these MTM amounts will settle and generate
cash.
|
Remainder
2006
|
2007
|
2008
|
2009
|
2010
|
After
2010
|
Total
|
||||||||||||||||
Prices
Actively Quoted - Exchange Traded
Contracts
|
$
|
(832
|
)
|
$
|
930
|
$
|
952
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
1,050
|
|||||||
Prices
Provided by Other External Sources
- OTC Broker Quotes (a)
|
2,691
|
2,434
|
923
|
1,794
|
-
|
-
|
7,842
|
|||||||||||||||
Prices
Based on Models and Other Valuation
Methods (b)
|
67
|
147
|
641
|
987
|
2,087
|
653
|
4,582
|
|||||||||||||||
Total
|
$
|
1,926
|
$
|
3,511
|
$
|
2,516
|
$
|
2,781
|
$
|
2,087
|
$
|
653
|
$
|
13,474
|
(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 pricing
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.
|
Power
|
Interest
Rate
|
Total
|
||||||||
Beginning
Balance in AOCI December 31, 2005
|
$
|
(352
|
)
|
$
|
158
|
$
|
(194
|
)
|
||
Changes
in Fair Value
|
2,632
|
-
|
2,632
|
|||||||
Impact
Due to Changes in SIA (a)
|
(106
|
)
|
-
|
(106
|
)
|
|||||
Reclassifications
from AOCI to Net Income for Cash Flow Hedges Settled
|
262
|
(44
|
)
|
218
|
||||||
Ending
Balance in AOCI June 30, 2006
|
$
|
2,436
|
$
|
114
|
$
|
2,550
|
(a)
|
See
“Allocation Agreement between AEP East companies and AEP West companies
and CSW Operating Agreement” section of Note
3.
|
Six
Months Ended
June
30, 2006
|
Twelve
Months Ended
December
31, 2005
|
||||||||||||||||
(in
thousands)
|
(in
thousands)
|
||||||||||||||||
End
|
High
|
Average
|
Low
|
End
|
High
|
Average
|
Low
|
||||||||||
$164
|
$385
|
$167
|
$96
|
$174
|
$289
|
$138
|
$50
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
REVENUES
|
|||||||||||||
Electric
Generation, Transmission and Distribution
|
$
|
121,074
|
$
|
108,510
|
$
|
258,694
|
$
|
217,591
|
|||||
Sales
to AEP Affiliates
|
14,109
|
13,709
|
28,077
|
32,257
|
|||||||||
Other
|
120
|
490
|
379
|
921
|
|||||||||
TOTAL
|
135,303
|
122,709
|
287,150
|
250,769
|
|||||||||
EXPENSES
|
|||||||||||||
Fuel
and Other Consumables for Electric Generation
|
31,790
|
31,989
|
75,756
|
60,668
|
|||||||||
Purchased
Electricity for Resale
|
1,991
|
1,786
|
2,964
|
3,910
|
|||||||||
Purchased
Electricity from AEP Affiliates
|
50,923
|
43,010
|
100,449
|
85,749
|
|||||||||
Other
Operation
|
13,738
|
14,255
|
27,486
|
28,197
|
|||||||||
Maintenance
|
9,293
|
8,482
|
16,434
|
14,398
|
|||||||||
Depreciation
and Amortization
|
11,572
|
11,225
|
23,029
|
22,377
|
|||||||||
Taxes
Other Than Income Taxes
|
2,442
|
2,219
|
4,954
|
4,644
|
|||||||||
TOTAL
|
121,749
|
112,966
|
251,072
|
219,943
|
|||||||||
OPERATING
INCOME
|
13,554
|
9,743
|
36,078
|
30,826
|
|||||||||
Other
Income
|
105
|
207
|
372
|
439
|
|||||||||
Interest
Expense
|
(7,440
|
)
|
(7,068
|
)
|
(14,736
|
)
|
(14,438
|
)
|
|||||
INCOME
BEFORE INCOME TAXES
|
6,219
|
2,882
|
21,714
|
16,827
|
|||||||||
Income
Tax Expense
|
1,168
|
436
|
6,833
|
4,496
|
|||||||||
NET
INCOME
|
$
|
5,051
|
$
|
2,446
|
$
|
14,881
|
$
|
12,331
|
Common
Stock
|
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other Comprehensive Income
(Loss)
|
Total
|
||||||||||||
DECEMBER
31, 2004
|
$
|
50,450
|
$
|
208,750
|
$
|
70,555
|
$
|
(8,775
|
)
|
$
|
320,980
|
|||||
COMPREHENSIVE
INCOME
|
||||||||||||||||
Other
Comprehensive Loss, Net of
Taxes:
|
||||||||||||||||
Cash
Flow Hedges, Net of Tax of $1,053
|
(1,956
|
)
|
(1,956
|
)
|
||||||||||||
NET
INCOME
|
12,331
|
12,331
|
||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
10,375
|
|||||||||||||||
JUNE
30, 2005
|
$
|
50,450
|
$
|
208,750
|
$
|
82,886
|
$
|
(10,731
|
)
|
$
|
331,355
|
|||||
DECEMBER
31, 2005
|
$
|
50,450
|
$
|
208,750
|
$
|
88,864
|
$
|
(223
|
)
|
$
|
347,841
|
|||||
Common
Stock Dividends
|
(5,000
|
)
|
(5,000
|
)
|
||||||||||||
TOTAL
|
342,841
|
|||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||
Other
Comprehensive Income, Net
of Taxes:
|
||||||||||||||||
Cash
Flow Hedges, Net of Tax of $1,478
|
2,744
|
2,744
|
||||||||||||||
NET
INCOME
|
14,881
|
14,881
|
||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
17,625
|
|||||||||||||||
JUNE
30, 2006
|
$
|
50,450
|
$
|
208,750
|
$
|
98,745
|
$
|
2,521
|
$
|
360,466
|
2006
|
2005
|
||||||
CURRENT
ASSETS
|
|||||||
Cash
and Cash Equivalents
|
$
|
432
|
$
|
526
|
|||
Accounts
Receivable:
|
|||||||
Customers
|
27,009
|
26,533
|
|||||
Affiliated
Companies
|
13,884
|
23,525
|
|||||
Accrued
Unbilled Revenues
|
3,322
|
6,311
|
|||||
Miscellaneous
|
715
|
35
|
|||||
Allowance
for Uncollectible Accounts
|
(211
|
)
|
(147
|
)
|
|||
Total
Accounts Receivable
|
44,719
|
56,257
|
|||||
Fuel
|
15,924
|
8,490
|
|||||
Materials
and Supplies
|
9,170
|
10,181
|
|||||
Risk
Management Assets
|
21,681
|
31,437
|
|||||
Accrued
Tax Benefits
|
4,539
|
6,598
|
|||||
Margin
Deposits
|
250
|
6,895
|
|||||
Prepayments
and Other
|
1,352
|
6,324
|
|||||
TOTAL
|
98,067
|
126,708
|
|||||
PROPERTY,
PLANT AND EQUIPMENT
|
|||||||
Electric:
|
|||||||
Production
|
475,177
|
472,575
|
|||||
Transmission
|
389,766
|
386,945
|
|||||
Distribution
|
465,343
|
456,063
|
|||||
Other
|
61,465
|
63,382
|
|||||
Construction
Work in Progress
|
25,591
|
35,461
|
|||||
Total
|
1,417,342
|
1,414,426
|
|||||
Accumulated
Depreciation and Amortization
|
433,097
|
425,817
|
|||||
TOTAL
- NET
|
984,245
|
988,609
|
|||||
OTHER
NONCURRENT ASSETS
|
|||||||
Regulatory
Assets
|
110,275
|
117,432
|
|||||
Long-term
Risk Management Assets
|
30,661
|
41,810
|
|||||
Deferred
Charges and Other
|
56,947
|
45,467
|
|||||
TOTAL
|
197,883
|
204,709
|
|||||
TOTAL
ASSETS
|
$
|
1,280,195
|
$
|
1,320,026
|
2006
|
2005
|
||||||
CURRENT
LIABILITIES
|
(in
thousands)
|
||||||
Advances
from Affiliates
|
$
|
36,991
|
$
|
6,040
|
|||
Accounts
Payable:
|
|||||||
General
|
29,393
|
32,454
|
|||||
Affiliated
Companies
|
22,677
|
29,326
|
|||||
Long-term
Debt Due Within One Year - Affiliated
|
-
|
39,771
|
|||||
Risk
Management Liabilities
|
15,163
|
28,770
|
|||||
Customer
Deposits
|
15,975
|
21,643
|
|||||
Accrued
Taxes
|
9,926
|
8,805
|
|||||
Accrued
Interest
|
7,419
|
7,428
|
|||||
Other
|
11,483
|
14,096
|
|||||
TOTAL
|
149,027
|
188,333
|
|||||
NONCURRENT
LIABILITIES
|
|||||||
Long-term
Debt - Nonaffiliated
|
427,354
|
427,219
|
|||||
Long-term
Debt - Affiliated
|
20,000
|
20,000
|
|||||
Long-term
Risk Management Liabilities
|
24,029
|
35,302
|
|||||
Deferred
Income Taxes
|
241,482
|
234,719
|
|||||
Regulatory
Liabilities and Deferred Investment Tax Credits
|
48,434
|
56,794
|
|||||
Deferred
Credits and Other
|
9,403
|
9,818
|
|||||
TOTAL
|
770,702
|
783,852
|
|||||
TOTAL
LIABILITIES
|
919,729
|
972,185
|
|||||
Commitments
and Contingencies (Note 5)
|
|||||||
COMMON
SHAREHOLDER’S EQUITY
|
|||||||
Common
Stock - $50 Par Value Per Share:
|
|||||||
Authorized
- 2,000,000 Shares
|
|||||||
Outstanding
- 1,009,000 Shares
|
50,450
|
50,450
|
|||||
Paid-in
Capital
|
208,750
|
208,750
|
|||||
Retained
Earnings
|
98,745
|
88,864
|
|||||
Accumulated
Other Comprehensive Income (Loss)
|
2,521
|
(223
|
)
|
||||
TOTAL
|
360,466
|
347,841
|
|||||
TOTAL
LIABILITIES AND SHAREHOLDER’S EQUITY
|
$
|
1,280,195
|
$
|
1,320,026
|
2006
|
2005
|
||||||
OPERATING
ACTIVITIES
|
|||||||
Net
Income
|
$
|
14,881
|
$
|
12,331
|
|||
Adjustments
for Noncash Items:
|
|||||||
Depreciation
and Amortization
|
23,029
|
22,377
|
|||||
Deferred
Income Taxes
|
3,044
|
2,482
|
|||||
Mark-to-Market
of Risk Management Contracts
|
(25
|
)
|
(3,330
|
)
|
|||
Pension
Contributions to Qualified Plan Trusts
|
-
|
(6,092
|
)
|
||||
Over/Under
Fuel Recovery
|
3,173
|
(7,181
|
)
|
||||
Change
in Other Noncurrent Assets
|
1,898
|
1,611
|
|||||
Change
in Other Noncurrent Liabilities
|
1,396
|
4,483
|
|||||
Changes
in Components of Working Capital:
|
|||||||
Accounts
Receivable, Net
|
11,538
|
7,653
|
|||||
Fuel,
Materials and Supplies
|
(6,423
|
)
|
(2,830
|
)
|
|||
Accounts
Payable
|
(7,679
|
)
|
10,926
|
||||
Accrued
Taxes, Net
|
3,180
|
(1,531
|
)
|
||||
Customer
Deposits
|
(5,668
|
)
|
3,995
|
||||
Other
Current Assets
|
8,531
|
(2,340
|
)
|
||||
Other
Current Liabilities
|
(1,993
|
)
|
(1,695
|
)
|
|||
Net
Cash Flows From Operating Activities
|
48,882
|
40,859
|
|||||
INVESTING
ACTIVITIES
|
|||||||
Construction
Expenditures
|
(34,458
|
)
|
(23,450
|
)
|
|||
Change
in Advances to Affiliates, Net
|
-
|
3,480
|
|||||
Other
|
191
|
(1
|
)
|
||||
Net
Cash Flows Used For Investing Activities
|
(34,267
|
)
|
(19,971
|
)
|
|||
FINANCING
ACTIVITIES
|
|||||||
Change
in Advances from Affiliates, Net
|
30,951
|
-
|
|||||
Retirement
of Long-term Debt - Affiliated
|
(40,000
|
)
|
(20,000
|
)
|
|||
Principal
Payments for Capital Lease Obligations
|
(660
|
)
|
(782
|
)
|
|||
Dividends
Paid on Common Stock
|
(5,000
|
)
|
-
|
||||
Net
Cash Flows Used For Financing Activities
|
(14,709
|
)
|
(20,782
|
)
|
|||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
(94
|
)
|
106
|
||||
Cash
and Cash Equivalents at Beginning of Period
|
526
|
132
|
|||||
Cash
and Cash Equivalents at End of Period
|
$
|
432
|
$
|
238
|
|||
SUPPLEMENTARY
INFORMATION
|
|||||||
Cash
Paid for Interest, Net of Capitalized Amounts
|
$
|
14,543
|
$
|
13,942
|
|||
Cash
Paid for Income Taxes, Net of Refunds
|
185
|
3,761
|
|||||
Noncash
Acquisitions Under Capital Leases
|
485
|
230
|
|||||
Construction
Expenditures Included in Accounts Payable at June 30,
|
4,522
|
2,107
|
|||||
See
Condensed Notes to Condensed Financial Statements of Registrant
Subsidiaries.
|
Footnote
Reference
|
|
Significant
Accounting Matters
|
Note
1
|
New
Accounting Pronouncements
|
Note
2
|
Rate
Matters
|
Note
3
|
Commitments
and Contingencies
|
Note
5
|
Guarantees
|
Note
6
|
Company-wide
Staffing and Budget Review
|
Note
7
|
Benefit
Plans
|
Note
9
|
Business
Segments
|
Note
11
|
Financing
Activities
|
Note
12
|
Second
Quarter of 2005
|
$
|
71
|
|||||
Changes
in Gross Margin:
|
|||||||
Retail
Margins
|
(30
|
)
|
|||||
Off-system
Sales
|
3
|
||||||
Transmission
Revenues
|
(12
|
)
|
|||||
Other
|
8
|
||||||
Total
Change in Gross Margin
|
(31
|
)
|
|||||
Changes
in Operating Expenses and Other:
|
|||||||
Other
Operation and Maintenance
|
(37
|
)
|
|||||
Depreciation
and Amortization
|
2
|
||||||
Taxes
Other Than Income Taxes
|
(5
|
)
|
|||||
Carrying
Costs Income
|
(4
|
)
|
|||||
Interest
Expense
|
2
|
||||||
Total
Change in Operating Expenses and Other
|
(42
|
)
|
|||||
Income
Tax Expense
|
25
|
||||||
Second
Quarter of 2006
|
$
|
23
|
·
|
Retail
Margins decreased $30 million primarily due to a decrease in retail
revenue primarily related to the transfer of two industrial customers
to
APCo and mild weather, increased delivered fuel costs and the receipt
of
SO2
allowances from Buckeye Power, Inc. under the Cardinal Station
Allowance
Agreement in the second quarter of 2005. The decrease was partially
offset
by the Rate Stabilization Plan (RSP) rate increase effective January
1,
2006.
|
·
|
Transmission
Revenues decreased $12 million primarily due to the elimination
of SECA
revenues as of April 1, 2006 and a $4 million provision for potential
SECA
refunds pending settlement negotiations with various intervenors.
See the
“SECA Revenue Subject to Refund” section of Note 3 - Rate
Matters.
|
·
|
Other
revenues increased $8 million partially due to an increase in Cook
Coal Terminal (CCT) revenues. Related expenses, which offset the
CCT
revenue increase, are included in Other Operation on the Condensed
Consolidated Statements of Income.
|
·
|
Other
Operation and Maintenance Expense increased $37 million primarily
due to
an increase in maintenance from planned and forced outages at the
Gavin,
Muskingum, Kammer, and Sporn plants related to major boiler overhauls,
boiler tube inspections and related removal costs.
|
·
|
Taxes
Other Than Income Taxes increased $5 million primarily due to an
increase
in property taxes.
|
·
|
Carrying
Costs Income decreased $4 million primarily due to the completion
of the
establishment of a regulatory asset for environmental carrying
costs from
2004 and 2005 that are now recovered during 2006 through 2008 according
to
the RSP.
|
Six
Months Ended June 30, 2005
|
$
|
171
|
|||||
Changes
in Gross Margin:
|
|||||||
Retail
Margins
|
(5
|
)
|
|||||
Off-system
Sales
|
6
|
||||||
Transmission
Revenues
|
(10
|
)
|
|||||
Other
|
11
|
||||||
Total
Change in Gross Margin
|
2
|
||||||
Changes
in Operating Expenses and Other:
|
|||||||
Other
Operation and Maintenance
|
(60
|
)
|
|||||
Depreciation
and Amortization
|
(3
|
)
|
|||||
Taxes
Other than Income Taxes
|
(4
|
)
|
|||||
Carrying
Costs Income
|
(23
|
)
|
|||||
Interest
Expense
|
4
|
||||||
Total
Change in Operating Expenses and Other
|
(86
|
)
|
|||||
Income
Tax Expense
|
31
|
||||||
Six
Months Ended June 30, 2006
|
$
|
118
|
·
|
Retail
Margins decreased $5 million primarily due to an increase in delivered
fuel costs, decreased capacity settlement receipts under the
Interconnection Agreement related to an increase in the generating
capacity of the AEP Power Pool members and the transfer of two
industrial
customers to APCo. The decrease was partially offset by the RSP
rate
increase effective January 1, 2006.
|
·
|
Off-System
Sales increased $6 million primarily due to an increase in AEP
Power Pool
physical sales partially offset by lower optimization
activities.
|
·
|
Transmission
Revenues decreased $10 million primarily due to the elimination
of SECA
revenues as of April 1, 2006 and a $4 million provision for potential
SECA
refunds pending settlement negotiations with various intervenors.
See the
“SECA Revenue Subject to Refund” section of Note 3 - Rate
Matters.
|
·
|
Other
revenues increased $11 million partially due to an increase in
gains on
sales of emission allowances to
affiliates.
|
·
|
Other
Operation and Maintenance expense increased $60 million primarily
due to
an increase in maintenance from planned and forced outages at the
Gavin,
Muskingum, Kammer, and Sporn plants related to major boiler overhauls,
boiler tube inspections and related removal costs and the establishment
of
a regulatory asset for PJM administrative fees which reduced expenses
in
the prior period, partially offset by major ice storm expense incurred
in
the prior period.
|
·
|
Taxes
Other Than Income Taxes increased $4 million primarily due to an
increase
in property taxes.
|
·
|
Carrying
Costs Income decreased $23 million primarily due to the completion
of the
establishment of a regulatory asset for environmental carrying
costs from
2004 and 2005 that are recovered during 2006 through 2008 according
to the
RSP. We recorded $16 million in environmental carrying costs in
the first
quarter of 2005 related to 2004.
|
·
|
Interest
Expense decreased $4 million primarily due to an increase in allowance
for
borrowed funds used during construction partially offset by interest
on
long-term debt issuances subsequent to June 2005 and an increase
in
advances from affiliate.
|
Moody’s
|
S&P
|
Fitch
|
|||
Senior
Unsecured Debt
|
A3
|
BBB
|
BBB+
|
2006
|
2005
|
||||||
(in
thousands)
|
|||||||
Cash
and Cash Equivalents at Beginning of Period
|
$
|
1,240
|
$
|
9,337
|
|||
Net
Cash Flows From (Used For):
|
|||||||
Operating
Activities
|
326,354
|
179,555
|
|||||
Investing
Activities
|
(516,878
|
)
|
(155,651
|
)
|
|||
Financing
Activities
|
190,274
|
(31,887
|
)
|
||||
Net
Decrease in Cash and Cash Equivalents
|
(250
|
)
|
(7,983
|
)
|
|||
Cash
and Cash Equivalents at End of Period
|
$
|
990
|
$
|
1,354
|
Principal
|
Interest
|
Due
|
||||||||
Type
of Debt
|
Amount
|
Rate
|
Date
|
|||||||
(in
thousands)
|
(%)
|
|||||||||
Pollution
Control Bonds
|
$
|
65,000
|
Variable
|
2036
|
||||||
Senior
Unsecured Note
|
350,000
|
6.00
|
2016
|
Principal
|
Interest
|
Due
|
||||||||
Type
of Debt
|
Amount
|
Rate
|
Date
|
|||||||
(in
thousands)
|
(%)
|
|||||||||
Notes
Payable
|
$
|
2,927
|
6.81
|
2008
|
||||||
Notes
Payable
|
3,250
|
6.27
|
2009
|
|||||||
Notes
Payable - Affiliated
|
200,000
|
3.32
|
2006
|
MTM
Risk Management Contracts
|
Cash
Flow Hedges
|
DETM
Assignment (a)
|
Total
|
||||||||||
Current
Assets
|
$
|
58,410
|
$
|
14,156
|
$
|
-
|
$
|
72,566
|
|||||
Noncurrent
Assets
|
97,794
|
753
|
-
|
98,547
|
|||||||||
Total
MTM Derivative Contract Assets
|
156,204
|
14,909
|
-
|
171,113
|
|||||||||
Current
Liabilities
|
(47,796
|
)
|
(3,033
|
)
|
(1,226
|
)
|
(52,055
|
)
|
|||||
Noncurrent
Liabilities
|
(69,493
|
)
|
-
|
(7,868
|
)
|
(77,361
|
)
|
||||||
Total
MTM Derivative Contract Liabilities
|
(117,289
|
)
|
(3,033
|
)
|
(9,094
|
)
|
(129,416
|
)
|
|||||
Total
MTM Derivative Contract Net Assets
(Liabilities)
|
$
|
38,915
|
$
|
11,876
|
$
|
(9,094
|
)
|
$
|
41,697
|
(a)
|
See
“Natural Gas Contracts with DETM” section of Note 17 in the 2005 Annual
Report.
|
Total
MTM Risk Management Contract Net Assets at December 31,
2005
|
$
|
40,894
|
||
(Gain)
Loss from Contracts Realized/Settled During the Period and Entered
in a
Prior Period
|
(2,870
|
)
|
||
Fair
Value of New Contracts at Inception When Entered During the Period
(a)
|
180
|
|||
Net
Option Premiums Paid/(Received) for Unexercised or Unexpired Option
Contracts Entered During the Period
|
(1,161
|
)
|
||
Change
in Fair Value Due to Valuation Methodology Changes on Forward
Contracts
|
469
|
|||
Changes
in Fair Value Due to Market Fluctuations During the Period
(b)
|
6,247
|
|||
Changes
Due to SIA (c)
|
(4,984
|
)
|
||
Changes
in Fair Value Allocated to Regulated Jurisdictions (d)
|
140
|
|||
Total
MTM Risk Management Contract Net Assets
|
38,915
|
|||
Net
Cash Flow Hedge Contracts
|
11,876
|
|||
DETM
Assignment (e)
|
(9,094
|
)
|
||
Total
MTM Risk Management Contract Net Assets at June 30, 2006
|
$
|
41,697
|
(a)
|
Most
of the fair value comes from longer term fixed price contracts
with
customers that seek 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)
|
See
“Allocation Agreement between AEP East companies and AEP West companies
and CSW Operating Agreement” section of Note 3.
|
(d)
|
“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.
|
(e)
|
See
“Natural Gas Contracts with DETM” section of Note 17 of the 2005 Annual
Report.
|
·
|
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 giving an indication
of
when these MTM amounts will settle and generate
cash.
|
Remainder
2006
|
2007
|
2008
|
2009
|
2010
|
After
2010
|
Total
|
||||||||||||||||
Prices
Actively Quoted - Exchange Traded
Contracts
|
$
|
(2,643
|
)
|
$
|
2,953
|
$
|
3,025
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
3,335
|
|||||||
Prices
Provided by Other External Sources
- OTC Broker Quotes (a)
|
7,274
|
7,395
|
3,025
|
5,697
|
-
|
-
|
23,391
|
|||||||||||||||
Prices
Based on Models and Other Valuation
Methods (b)
|
129
|
(1,026
|
)
|
1,247
|
3,136
|
6,629
|
2,074
|
12,189
|
||||||||||||||
Total
|
$
|
4,760
|
$
|
9,322
|
$
|
7,297
|
$
|
8,833
|
$
|
6,629
|
$
|
2,074
|
$
|
38,915
|
(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 pricing
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.
|
Power
|
Foreign
Currency
|
Interest
Rate
|
Total
|
||||||||||
Beginning
Balance in AOCI December 31, 2005
|
$
|
(392
|
)
|
$
|
(344
|
)
|
$
|
1,491
|
$
|
755
|
|||
Changes
in Fair Value
|
8,405
|
-
|
2,761
|
11,166
|
|||||||||
Impact
due to Change in SIA (a)
|
(337
|
)
|
-
|
-
|
(337
|
)
|
|||||||
Reclassifications
from AOCI to Net Income for Cash Flow Hedges Settled
|
57
|
7
|
(293
|
)
|
(229
|
)
|
|||||||
Ending
Balance in AOCI June 30, 2006
|
$
|
7,733
|
$
|
(337
|
)
|
$
|
3,959
|
$
|
11,355
|
(a)
|
See
“Allocation Agreement between AEP East companies and AEP West companies
and CSW Operating Agreement” section of Note
3.
|
Six
Months Ended
June
30, 2006
|
Twelve
Months Ended
December
31, 2005
|
||||||||||||||||
(in
thousands)
|
(in
thousands)
|
||||||||||||||||
End
|
High
|
Average
|
Low
|
End
|
High
|
Average
|
Low
|
||||||||||
$522
|
$1,221
|
$529
|
$306
|
$583
|
$968
|
$461
|
$166
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
REVENUES
|
|||||||||||||
Electric
Generation, Transmission and Distribution
|
$
|
453,064
|
$
|
473,991
|
$
|
997,703
|
$
|
945,001
|
|||||
Sales
to AEP Affiliates
|
154,648
|
166,227
|
303,907
|
339,953
|
|||||||||
Other
- Affiliated
|
3,866
|
3,747
|
7,575
|
7,201
|
|||||||||
Other
- Nonaffiliated
|
4,429
|
7,034
|
9,428
|
13,998
|
|||||||||
TOTAL
|
616,007
|
650,999
|
1,318,613
|
1,306,153
|
|||||||||
EXPENSES
|
|||||||||||||
Fuel
and Other Consumables for Electric Generation
|
211,538
|
222,042
|
446,668
|
449,091
|
|||||||||
Purchased
Electricity for Resale
|
26,313
|
22,423
|
48,027
|
41,185
|
|||||||||
Purchased
Electricity from AEP Affiliates
|
28,091
|
25,093
|
56,663
|
50,711
|
|||||||||
Other
Operation
|
99,196
|
81,279
|
185,833
|
145,849
|
|||||||||
Maintenance
|
71,416
|
52,479
|
118,940
|
98,954
|
|||||||||
Depreciation
and Amortization
|
77,848
|
79,941
|
156,661
|
153,888
|
|||||||||
Taxes
Other Than Income Taxes
|
48,536
|
43,841
|
95,689
|
91,140
|
|||||||||
TOTAL
|
562,938
|
527,098
|
1,108,481
|
1,030,818
|
|||||||||
OPERATING
INCOME
|
53,069
|
123,901
|
210,132
|
275,335
|
|||||||||
Other
Income (Expense):
|
|||||||||||||
Interest
Income
|
595
|
585
|
1,232
|
1,472
|
|||||||||
Carrying
Costs Income
|
3,451
|
7,512
|
6,834
|
29,549
|
|||||||||
Allowance
for Equity Funds Used During Construction
|
398
|
305
|
1,136
|
732
|
|||||||||
Interest
Expense
|
(24,437
|
)
|
(25,839
|
)
|
(47,851
|
)
|
(52,002
|
)
|
|||||
INCOME
BEFORE INCOME TAXES
|
33,076
|
106,464
|
171,483
|
255,086
|
|||||||||
Income
Tax Expense
|
9,677
|
34,983
|
53,052
|
84,122
|
|||||||||
NET
INCOME
|
23,399
|
71,481
|
118,431
|
170,964
|
|||||||||
Preferred
Stock Dividend Requirements including Capital Stock Expense
and
Other Expense
|
183
|
357
|
366
|
540
|
|||||||||
EARNINGS
APPLICABLE TO COMMON STOCK
|
$
|
23,216
|
$
|
71,124
|
$
|
118,065
|
$
|
170,424
|
Common
Stock
|
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other Comprehensive Income (Loss)
|
Total
|
||||||||||||
DECEMBER
31, 2004
|
$
|
321,201
|
$
|
462,485
|
$
|
764,416
|
$
|
(74,264
|
)
|
$
|
1,473,838
|
|||||
Common
Stock Dividends
|
(14,999
|
)
|
(14,999
|
)
|
||||||||||||
Preferred
Stock Dividends
|
(366
|
)
|
(366
|
)
|
||||||||||||
Other
|
4,151
|
(174
|
)
|
3,977
|
||||||||||||
TOTAL
|
1,462,450
|
|||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||
Other
Comprehensive Loss, Net of Taxes:
|
||||||||||||||||
Cash
Flow Hedges, Net of Tax of $3,823
|
(7,099
|
)
|
(7,099
|
)
|
||||||||||||
NET
INCOME
|
170,964
|
170,964
|
||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
163,865
|
|||||||||||||||
JUNE
30, 2005
|
$
|
321,201
|
$
|
466,636
|
$
|
919,841
|
$
|
(81,363
|
)
|
$
|
1,626,315
|
|||||
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
|
2006
|
2005
|
||||||
CURRENT
ASSETS
|
|||||||
Cash
and Cash Equivalents
|
$
|
990
|
$
|
1,240
|
|||
Advances
to Affiliates
|
36,787
|
-
|
|||||
Accounts
Receivable:
|
|||||||
Customers
|
111,742
|
125,404
|
|||||
Affiliated
Companies
|
98,590
|
167,579
|
|||||
Accrued
Unbilled Revenues
|
12,749
|
14,817
|
|||||
Miscellaneous
|
3,665
|
15,644
|
|||||
Allowance
for Uncollectible Accounts
|
(2,651
|
)
|
(1,517
|
)
|
|||
Total
Accounts Receivable
|
224,095
|
321,927
|
|||||
Fuel
|
148,342
|
97,600
|
|||||
Materials
and Supplies
|
66,270
|
60,937
|
|||||
Emission
Allowances
|
22,308
|
39,251
|
|||||
Risk
Management Assets
|
72,566
|
115,020
|
|||||
Accrued
Tax Benefits
|
1,863
|
39,965
|
|||||
Margin
Deposits
|
1,488
|
23,053
|
|||||
Prepayments
and Other
|
8,697
|
4,386
|
|||||
TOTAL
|
583,406
|
703,379
|
|||||
PROPERTY,
PLANT AND EQUIPMENT
|
|||||||
Electric:
|
|||||||
Production
|
4,341,360
|
4,278,553
|
|||||
Transmission
|
1,007,723
|
1,002,255
|
|||||
Distribution
|
1,296,690
|
1,258,518
|
|||||
Other
|
295,114
|
293,794
|
|||||
Construction
Work in Progress
|
999,227
|
690,168
|
|||||
Total
|
7,940,114
|
7,523,288
|
|||||
Accumulated
Depreciation and Amortization
|
2,776,072
|
2,738,899
|
|||||
TOTAL
- NET
|
5,164,042
|
4,784,389
|
|||||
OTHER
NONCURRENT ASSETS
|
|||||||
Regulatory
Assets
|
364,411
|
398,007
|
|||||
Long-term
Risk Management Assets
|
98,547
|
144,015
|
|||||
Deferred
Charges and Other
|
263,959
|
300,880
|
|||||
TOTAL
|
726,917
|
842,902
|
|||||
TOTAL
ASSETS
|
$
|
6,474,365
|
$
|
6,330,670
|
2006
|
2005
|
||||||
CURRENT
LIABILITIES
|
(in
thousands)
|
||||||
Advances
from Affiliates
|
$
|
-
|
$
|
70,071
|
|||
Accounts
Payable:
|
|||||||
General
|
228,869
|
210,752
|
|||||
Affiliated
Companies
|
109,016
|
147,470
|
|||||
Short-term
Debt - Nonaffiliated
|
5,272
|
10,366
|
|||||
Long-term
Debt Due Within One Year - Affiliated
|
-
|
200,000
|
|||||
Long-term
Debt Due Within One Year - Nonaffiliated
|
12,354
|
12,354
|
|||||
Risk
Management Liabilities
|
52,055
|
108,797
|
|||||
Customer
Deposits
|
29,857
|
51,209
|
|||||
Accrued
Taxes
|
113,439
|
158,774
|
|||||
Accrued
Interest
|
38,969
|
36,298
|
|||||
Other
|
106,345
|
111,480
|
|||||
TOTAL
|
696,176
|
1,117,571
|
|||||
NONCURRENT
LIABILITIES
|
|||||||
Long-term
Debt - Nonaffiliated
|
2,190,481
|
1,787,316
|
|||||
Long-term
Debt - Affiliated
|
200,000
|
200,000
|
|||||
Long-term
Risk Management Liabilities
|
77,361
|
119,247
|
|||||
Deferred
Income Taxes
|
986,010
|
987,386
|
|||||
Regulatory
Liabilities and Deferred Investment Tax Credits
|
176,868
|
168,492
|
|||||
Deferred
Credits and Other
|
146,830
|
154,770
|
|||||
TOTAL
|
3,777,550
|
3,417,211
|
|||||
TOTAL
LIABILITIES
|
4,473,726
|
4,534,782
|
|||||
Minority
Interest
|
17,394
|
11,302
|
|||||
Cumulative
Preferred Stock Not Subject to Mandatory Redemption
|
16,631
|
16,639
|
|||||
Commitments
and Contingencies (Note 5)
|
|||||||
COMMON
SHAREHOLDER’S EQUITY
|
|||||||
Common
Stock - No Par Value Per Share:
|
|||||||
Authorized
- 40,000,000 Shares
|
|||||||
Outstanding
- 27,952,473 Shares
|
321,201
|
321,201
|
|||||
Paid-in
Capital
|
536,639
|
466,637
|
|||||
Retained
Earnings
|
1,097,419
|
979,354
|
|||||
Accumulated
Other Comprehensive Income
|
11,355
|
755
|
|||||
TOTAL
|
1,966,614
|
1,767,947
|
|||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
6,474,365
|
$
|
6,330,670
|
2006
|
2005
|
||||||
OPERATING
ACTIVITIES
|
|||||||
Net
Income
|
$
|
118,431
|
$
|
170,964
|
|||
Adjustments
for Noncash Items:
|
|||||||
Depreciation
and Amortization
|
156,661
|
153,888
|
|||||
Deferred
Income Taxes
|
(8,073
|
)
|
9,923
|
||||
Carrying
Costs Income
|
(6,834
|
)
|
(29,549
|
)
|
|||
Mark-to-Market
of Risk Management Contracts
|
1,263
|
(2,271
|
)
|
||||
Pension
Contributions to Qualified Plan Trusts
|
-
|
(40,013
|
)
|
||||
Deferred
Property Taxes
|
35,550
|
32,254
|
|||||
Change
in Other Noncurrent Assets
|
9,323
|
(17,618
|
)
|
||||
Change
in Other Noncurrent Liabilities
|
16,355
|
3,462
|
|||||
Changes
in Components of Working Capital:
|
|||||||
Accounts
Receivable, Net
|
97,832
|
(6,457
|
)
|
||||
Fuel,
Materials and Supplies
|
(56,075
|
)
|
(44,097
|
)
|
|||
Accounts
Payable
|
(42,878
|
)
|
(35,434
|
)
|
|||
Accrued
Taxes, Net
|
(7,233
|
)
|
(93,300
|
)
|
|||
Other
Current Assets
|
35,848
|
53,872
|
|||||
Other
Current Liabilities
|
(23,816
|
)
|
23,931
|
||||
Net
Cash Flows From Operating Activities
|
326,354
|
179,555
|
|||||
INVESTING
ACTIVITIES
|
|||||||
Construction
Expenditures
|
(481,541
|
)
|
(288,921
|
)
|
|||
Change
in Advances to Affiliates, Net
|
(36,787
|
)
|
125,971
|
||||
Other
|
1,450
|
7,299
|
|||||
Net
Cash Flows Used For Investing Activities
|
(516,878
|
)
|
(155,651
|
)
|
|||
FINANCING
ACTIVITIES
|
|||||||
Capital
Contributions from Parent Company
|
70,000
|
-
|
|||||
Issuance
of Long-term Debt - Nonaffiliated
|
405,839
|
214,120
|
|||||
Change
in Short-term Debt, Net - Nonaffiliated
|
(5,094
|
)
|
(9,146
|
)
|
|||
Change
in Advances from Affiliates, Net
|
(70,071
|
)
|
11,528
|
||||
Retirement
of Long-term Debt - Nonaffiliated
|
(6,177
|
)
|
(224,177
|
)
|
|||
Retirement
of Long-term Debt - Affiliated
|
(200,000
|
)
|
-
|
||||
Retirement
of Preferred Stock
|
(8
|
)
|
(5,000
|
)
|
|||
Principal
Payments for Capital Lease Obligations
|
(3,849
|
)
|
(3,847
|
)
|
|||
Dividends
Paid on Common Stock
|
-
|
(14,999
|
)
|
||||
Dividends
Paid on Cumulative Preferred Stock
|
(366
|
)
|
(366
|
)
|
|||
Net
Cash Flows From (Used For) Financing Activities
|
190,274
|
(31,887
|
)
|
||||
Net
Decrease in Cash and Cash Equivalents
|
(250
|
)
|
(7,983
|
)
|
|||
Cash
and Cash Equivalents at Beginning of Period
|
1,240
|
9,337
|
|||||
Cash
and Cash Equivalents at End of Period
|
$
|
990
|
$
|
1,354
|
|||
SUPPLEMENTARY
INFORMATION
|
|||||||
Cash
Paid for Interest, Net of Capitalized Amounts
|
$
|
43,794
|
$
|
52,403
|
|||
Cash
Paid for Income Taxes, Net of Refunds
|
24,077
|
114,782
|
|||||
Noncash
Acquisitions Under Capital Leases
|
1,662
|
7,210
|
|||||
Construction
Expenditures Included in Accounts Payable at June 30,
|
97,389
|
51,850
|
|||||
See
Condensed Notes to Condensed Financial Statements of Registrant
Subsidiaries.
|
Footnote
Reference
|
|
Significant
Accounting Matters
|
Note
1
|
New
Accounting Pronouncements
|
Note
2
|
Rate
Matters
|
Note
3
|
Customer
Choice and Industry Restructuring
|
Note
4
|
Commitments
and Contingencies
|
Note
5
|
Guarantees
|
Note
6
|
Company-wide
Staffing and Budget Review
|
Note
7
|
Benefit
Plans
|
Note
9
|
Business
Segments
|
Note
11
|
Financing
Activities
|
Note
12
|
Second
Quarter of 2005
|
$
|
19
|
|||||
Changes
in Gross Margin:
|
|||||||
Retail
and Off-system Sales Margins
|
11
|
||||||
Other
|
1
|
||||||
Total
Change in Gross Margin
|
12
|
||||||
Changes
in Operating Expenses and Other:
|
|||||||
Other
Operation and Maintenance
|
(11
|
)
|
|||||
Taxes
Other Than Income Taxes
|
(4
|
)
|
|||||
Interest
Expense
|
(1
|
)
|
|||||
Total
Change in Operating Expenses and Other
|
(16
|
)
|
|||||
Second
Quarter of 2006
|
$
|
15
|
·
|
Retail
and Off-system Sales Margins increased $11 million primarily due
to higher
retail margins from an increase in sales volumes, partially offset
by
decreased off-system sales margins due to lower optimization activities
and a reduction in physical off-system sales under the SIA.
|
·
|
Other
Operation and Maintenance expenses increased $11 million due to
a $7
million increase in scheduled overhead line maintenance and a $3
million
increase primarily due to slightly higher power plant operations
and
factoring of accounts receivable.
|
·
|
Taxes
Other Than Income Taxes increased $4 million primarily due to the
absence
of a 2004 adjustment for property-related taxes recorded in
2005.
|
Six
Months Ended June 30, 2005
|
$
|
19
|
|||||
Changes
in Gross Margin:
|
|||||||
Retail
and Off-system Sales Margins
|
14
|
||||||
Transmission
Revenues
|
1
|
||||||
Other
|
3
|
||||||
Total
Change in Gross Margin
|
18
|
||||||
Changes
in Operating Expenses and Other:
|
|||||||
Other
Operation and Maintenance
|
(27
|
)
|
|||||
Depreciation
and Amortization
|
2
|
||||||
Taxes
Other Than Income Taxes
|
(4
|
)
|
|||||
Interest
Expense
|
(2
|
)
|
|||||
Total
Change in Operating Expenses and Other
|
(31
|
)
|
|||||
Income
Tax Expense
|
3
|
||||||
Six
Months Ended June 30, 2006
|
$
|
9
|
·
|
Retail
and Off-system Sales Margins increased $14 million
primarily due to higher retail margins from an increase in sales
volumes,
partially offset by decreased off-system sales margins due to lower
optimization activities and a reduction in physical off-system
sales under
the SIA.
|
·
|
Other increased $3 million primarily due to a 2006 settlement received from an electric cooperative. |
·
|
Other
Operation and Maintenance expenses increased $27 million due to
a $6
million increase in forced and scheduled power plant maintenance,
a $10
million increase in scheduled overhead line maintenance and a $10
million
increase primarily due to higher power plant operations, customer-related
expenses, factoring of accounts receivable and outside
services.
|
·
|
Depreciation
and Amortization decreased $2 million primarily due to a change
in
depreciation rates implemented in June 2005, resulting from the
settlement
of our 2005 rate review proceedings.
|
·
|
Taxes
Other Than Income Taxes increased $4 million primarily due to the
absence
of a 2004 adjustment for property-related taxes recorded in
2005.
|
·
|
Interest
Expense increased $2 million primarily due to increased affiliated
short-term borrowings.
|
Moody’s
|
S&P
|
Fitch
|
|||
Senior
Unsecured Debt
|
Baa1
|
BBB
|
A-
|
Principal
Amount
|
Interest
|
Due
|
|||||
Type
of Debt
|
Rate
|
Date
|
|||||
(in
thousands)
|
(%)
|
||||||
Notes
Payable - Affiliated
|
$
|
50,000
|
3.35
|
2006
|
MTM
Risk Management Contracts
|
Cash
Flow Hedges
|
Total
|
||||||||
Current
Assets
|
$
|
71,817
|
$
|
-
|
$
|
71,817
|
||||
Noncurrent
Assets
|
40,199
|
-
|
40,199
|
|||||||
Total
MTM Derivative Contract Assets
|
112,016
|
-
|
112,016
|
|||||||
Current
Liabilities
|
(55,332
|
)
|
-
|
(55,332
|
)
|
|||||
Noncurrent
Liabilities
|
(30,491
|
)
|
-
|
(30,491
|
)
|
|||||
Total
MTM Derivative Contract Liabilities
|
(85,823
|
)
|
-
|
(85,823
|
)
|
|||||
Total
MTM Derivative Contract Net Assets
|
$
|
26,193
|
$
|
-
|
$
|
26,193
|
Total
MTM Risk Management Contract Net Assets at December 31,
2005
|
$
|
14,214
|
||
(Gain)
Loss from Contracts Realized/Settled During the Period and Entered
in a
Prior Period
|
140
|
|||
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
|
7,621
|
|||
Change
in Fair Value Due to Valuation Methodology Changes on Forward
Contracts
|
-
|
|||
Changes
in Fair Value Due to Market Fluctuations During the Period
(b)
|
(162
|
)
|
||
Changes
Due to SIA and CSW Operating Agreement (c)
|
10,185
|
|||
Changes
in Fair Value Allocated to Regulated Jurisdictions (d)
|
(5,805
|
)
|
||
Total
MTM Risk Management Contract Net Assets
|
26,193
|
|||
Net
Cash Flow Hedge Contracts
|
-
|
|||
Total
MTM Risk Management Contract Net Assets at June 30,
2006
|
$
|
26,193
|
(a)
|
Most
of the fair value comes from longer term fixed price contracts
with
customers that seek 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)
|
See
“Allocation Agreement between AEP East companies and AEP West companies
and CSW Operating Agreement” section of Note 3.
|
(d)
|
“Changes
in Fair Value Allocated to Regulated Jurisdictions” relates to the net
gains (losses) of those contracts that are not reflected in the
Condensed
Statements of Operations. 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
our total MTM asset or liability (external sources or modeled
internally).
|
·
|
The
maturity, by year, of our net assets/liabilities giving an indication
of
when these MTM amounts will settle and generate
cash.
|
Remainder2006
|
2007
|
2008
|
2009
|
2010
|
After
2010
|
Total
|
||||||||||||||||
Prices
Actively Quoted - Exchange Traded
Contracts
|
$
|
(880
|
)
|
$
|
(1,879
|
)
|
$
|
595
|
$
|
(123
|
)
|
$
|
-
|
$
|
-
|
$
|
(2,287
|
)
|
||||
Prices
Provided by Other External Sources
- OTC Broker Quotes (a)
|
5,961
|
6,348
|
9,343
|
398
|
-
|
-
|
22,050
|
|||||||||||||||
Prices
Based on Models and Other Valuation
Methods (b)
|
9,081
|
(676
|
)
|
(1,945
|
)
|
(26
|
)
|
(3
|
)
|
(1
|
)
|
6,430
|
||||||||||
Total
|
$
|
14,162
|
$
|
3,793
|
$
|
7,993
|
$
|
249
|
$
|
(3
|
)
|
$
|
(1
|
)
|
$
|
26,193
|
(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 pricing
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.
|
Power
|
Interest
Rate
|
Total
|
||||||||
Beginning
Balance in AOCI December 31, 2005
|
$
|
(629
|
)
|
$
|
(483
|
)
|
$
|
(1,112
|
)
|
|
Changes
in Fair Value
|
12
|
-
|
12
|
|||||||
Impact
Due to Change in SIA (a)
|
506
|
-
|
506
|
|||||||
Reclassifications
from AOCI to Net Income for Cash
Flow Hedges Settled
|
123
|
55
|
178
|
|||||||
Ending
Balance in AOCI June 30, 2006
|
$
|
12
|
$
|
(428
|
)
|
$
|
(416
|
)
|
(a)
|
See
“Allocation Agreement between AEP East companies and AEP West companies
and CSW Operating Agreement” section of Note
3.
|
Six
Months Ended
June
30, 2006
|
Twelve
Months Ended
December
31, 2005
|
||||||||||||||||
(in
thousands)
|
(in
thousands)
|
||||||||||||||||
End
|
High
|
Average
|
Low
|
End
|
High
|
Average
|
Low
|
||||||||||
$603
|
$1,432
|
$546
|
$58
|
$311
|
$517
|
$246
|
$89
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
REVENUES
|
|||||||||||||
Electric
Generation, Transmission and Distribution
|
$
|
333,313
|
$
|
272,329
|
$
|
672,914
|
$
|
522,427
|
|||||
Sales
to AEP Affiliates
|
12,545
|
13,650
|
26,613
|
16,282
|
|||||||||
Other
|
1,188
|
623
|
2,248
|
975
|
|||||||||
TOTAL
|
347,046
|
286,602
|
701,775
|
539,684
|
|||||||||
EXPENSES
|
|||||||||||||
Fuel
and Other Consumables for Electric Generation
|
150,976
|
129,544
|
364,149
|
263,722
|
|||||||||
Purchased
Electricity for Resale
|
56,358
|
30,132
|
89,575
|
44,925
|
|||||||||
Purchased
Electricity from AEP Affiliates
|
15,880
|
15,389
|
37,111
|
38,234
|
|||||||||
Other
Operation
|
40,098
|
36,641
|
76,965
|
67,139
|
|||||||||
Maintenance
|
22,033
|
14,153
|
42,340
|
25,512
|
|||||||||
Depreciation
and Amortization
|
21,600
|
22,247
|
42,621
|
44,866
|
|||||||||
Taxes
Other Than Income Taxes
|
10,077
|
6,061
|
20,153
|
15,738
|
|||||||||
TOTAL
|
317,022
|
254,167
|
672,914
|
500,136
|
|||||||||
OPERATING
INCOME
|
30,024
|
32,435
|
28,861
|
39,548
|
|||||||||
Other
Income
|
211
|
242
|
780
|
407
|
|||||||||
Interest
Expense
|
(9,634
|
)
|
(8,621
|
)
|
(18,769
|
)
|
(16,496
|
)
|
|||||
INCOME
BEFORE INCOME TAXES
|
20,601
|
24,056
|
10,872
|
23,459
|
|||||||||
Income
Tax Expense
|
5,963
|
5,486
|
1,591
|
4,384
|
|||||||||
NET
INCOME
|
14,638
|
18,570
|
9,281
|
19,075
|
|||||||||
Preferred
Stock Dividend Requirements
|
53
|
53
|
106
|
106
|
|||||||||
EARNINGS
APPLICABLE TO COMMON STOCK
|
$
|
14,585
|
$
|
18,517
|
$
|
9,175
|
$
|
18,969
|
Common
Stock
|
Paid-in
Capital
|
Retained
Earnings
|
Accumulated
Other Comprehensive Income (Loss)
|
Total
|
||||||||||||
DECEMBER
31, 2004
|
$
|
157,230
|
$
|
230,016
|
$
|
141,935
|
$
|
75
|
$
|
529,256
|
||||||
Common
Stock Dividends
|
(17,000
|
)
|
(17,000
|
)
|
||||||||||||
Preferred
Stock Dividends
|
(106
|
)
|
(106
|
)
|
||||||||||||
TOTAL
|
512,150
|
|||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||
Other
Comprehensive Loss, Net of Taxes:
|
||||||||||||||||
Cash
Flow Hedges, Net of Tax of $798
|
(1,483
|
)
|
(1,483
|
)
|
||||||||||||
NET
INCOME
|
19,075
|
19,075
|
||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
17,592
|
|||||||||||||||
JUNE
30, 2005
|
$
|
157,230
|
$
|
230,016
|
$
|
143,904
|
$
|
(1,408
|
)
|
$
|
529,742
|
|||||
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
|
See
Condensed Notes to Condensed Financial Statements of Registrant
Subsidiaries.
|
2006
|
2005
|
||||||
CURRENT
ASSETS
|
|||||||
Cash
and Cash Equivalents
|
$
|
2,001
|
$
|
1,520
|
|||
Accounts
Receivable:
|
|||||||
Customers
|
58,481
|
37,740
|
|||||
Affiliated
Companies
|
45,649
|
73,321
|
|||||
Miscellaneous
|
9,360
|
10,501
|
|||||
Allowance
for Uncollectible Accounts
|
(248
|
)
|
(240
|
)
|
|||
Total Accounts Receivable
|
113,242
|
121,322
|
|||||
Fuel
|
18,157
|
16,431
|
|||||
Materials
and Supplies
|
43,635
|
38,545
|
|||||
Risk
Management Assets
|
71,817
|
40,383
|
|||||
Accrued
Tax Benefits
|
-
|
11,972
|
|||||
Regulatory
Asset for Under-Recovered Fuel Costs
|
33,635
|
108,732
|
|||||
Margin
Deposits
|
56,968
|
10,051
|
|||||
Prepayments
and Other
|
2,575
|
4,236
|
|||||
TOTAL
|
342,030
|
353,192
|
|||||
PROPERTY,
PLANT AND EQUIPMENT
|
|||||||
Electric:
|
|||||||
Production
|
1,082,122
|
1,072,928
|
|||||
Transmission
|
490,629
|
479,272
|
|||||
Distribution
|
1,181,226
|
1,140,535
|
|||||
Other
|
235,026
|
211,805
|
|||||
Construction
Work in Progress
|
71,305
|
90,455
|
|||||
Total
|
3,060,308
|
2,994,995
|
|||||
Accumulated
Depreciation and Amortization
|
1,185,635
|
1,175,858
|
|||||
TOTAL
- NET
|
1,874,673
|
1,819,137
|
|||||
OTHER
NONCURRENT ASSETS
|
|||||||
Regulatory
Assets
|
85,178
|
50,723
|
|||||
Long-term
Risk Management Assets
|
40,199
|
33,566
|
|||||
Employee
Benefits and Pension Assets
|
80,654
|
82,559
|
|||||
Deferred
Charges and Other
|
34,035
|
16,287
|
|||||
TOTAL
|
240,066
|
183,135
|
|||||
TOTAL
ASSETS
|
$
|
2,456,769
|
$
|
2,355,464
|
2006
|
2005
|
||||||
CURRENT
LIABILITIES
|
(in
thousands)
|
||||||
Advances
from Affiliates
|
$
|
139,831
|
$
|
75,883
|
|||
Accounts
Payable:
|
|||||||
General
|
135,395
|
130,627
|
|||||
Affiliated
Companies
|
110,983
|
89,786
|
|||||
Long-term
Debt Due Within One Year - Affiliated
|
-
|
50,000
|
|||||
Risk
Management Liabilities
|
55,332
|
38,243
|
|||||
Customer
Deposits
|
55,339
|
53,844
|
|||||
Accrued
Taxes
|
44,424
|
22,420
|
|||||
Other
|
32,327
|
51,548
|
|||||
TOTAL
|
573,631
|
512,351
|
|||||
NONCURRENT
LIABILITIES
|
|||||||
Long-term
Debt - Nonaffiliated
|
521,101
|
521,071
|
|||||
Long-term
Risk Management Liabilities
|
30,491
|
22,582
|
|||||
Deferred
Income Taxes
|
415,090
|
436,382
|
|||||
Regulatory
Liabilities and Deferred Investment Tax Credits
|
327,532
|
284,640
|
|||||
Deferred
Credits and Other
|
25,194
|
24,579
|
|||||
TOTAL
|
1,319,408
|
1,289,254
|
|||||
TOTAL
LIABILITIES
|
1,893,039
|
1,801,605
|
|||||
Cumulative
Preferred Stock Not Subject to Mandatory Redemption
|
5,262
|
5,262
|
|||||
Commitments
and Contingencies (Note 5)
|
|||||||
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
|
230,016
|
230,016
|
|||||
Retained
Earnings
|
171,790
|
162,615
|
|||||
Accumulated
Other Comprehensive Income (Loss)
|
(568
|
)
|
(1,264
|
)
|
|||
TOTAL
|
558,468
|
548,597
|
|||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
2,456,769
|
$
|
2,355,464
|
2006
|
2005
|
||||||
OPERATING
ACTIVITIES
|
|||||||
Net
Income
|
$
|
9,281
|
$
|
19,075
|
|||
Adjustments
for Noncash Items:
|
|||||||
Depreciation
and Amortization
|
42,621
|
44,866
|
|||||
Deferred
Income Taxes
|
(22,319
|
)
|
2,998
|
||||
Mark-to-Market
of Risk Management Contracts
|
(11,979
|
)
|
10,934
|
||||
Deferred
Property Taxes
|
(16,196
|
)
|
(16,245
|
)
|
|||
Change
in Other Noncurrent Assets
|
9,665
|
(18,943
|
)
|
||||
Change
in Other Noncurrent Liabilities
|
(8,232
|
)
|
(2,529
|
)
|
|||
Changes
in Components of Working Capital:
|
|||||||
Accounts
Receivable, Net
|
8,080
|
19,705
|
|||||
Fuel,
Materials and Supplies
|
(6,816
|
)
|
(6,755
|
)
|
|||
Accounts
Payable
|
28,517
|
52,198
|
|||||
Accrued
Taxes, Net
|
33,976
|
11,161
|
|||||
Over/Under
Fuel Recovery
|
75,097
|
1,551
|
|||||
Margin
Deposits
|
(46,917
|
)
|
1,753
|
||||
Other
Current Assets
|
1,655
|
535
|
|||||
Other
Current Liabilities
|
(17,726
|
)
|
(9,008
|
)
|
|||
Net
Cash Flows From Operating Activities
|
78,707
|
111,296
|
|||||
INVESTING
ACTIVITIES
|
|||||||
Construction
Expenditures
|
(91,617
|
)
|
(55,697
|
)
|
|||
Change
in Other Cash Deposits, Net
|
6
|
(6
|
)
|
||||
Change
in Advances to Affiliates, Net
|
-
|
(7,084
|
)
|
||||
Net
Cash Flows Used For Investing Activities
|
(91,611
|
)
|
(62,787
|
)
|
|||
FINANCING
ACTIVITIES
|
|||||||
Issuance
of Long-term Debt - Nonaffiliated
|
-
|
74,408
|
|||||
Retirement
of Long-term Debt - Nonaffiliated
|
-
|
(50,000
|
)
|
||||
Retirement
of Long-term Debt - Affiliated
|
(50,000
|
)
|
-
|
||||
Change
in Advances from Affiliates, Net
|
63,948
|
(55,002
|
)
|
||||
Principal
Payments for Capital Lease Obligations
|
(457
|
)
|
(310
|
)
|
|||
Dividends
Paid on Common Stock
|
-
|
(17,000
|
)
|
||||
Dividends
Paid on Cumulative Preferred Stock
|
(106
|
)
|
(106
|
)
|
|||
Net
Cash Flows From (Used For) Financing Activities
|
13,385
|
(48,010
|
)
|
||||
Net
Increase in Cash and Cash Equivalents
|
481
|
499
|
|||||
Cash
and Cash Equivalents at Beginning of Period
|
1,520
|
279
|
|||||
Cash
and Cash Equivalents at End of Period
|
$
|
2,001
|
$
|
778
|
|||
SUPPLEMENTARY
INFORMATION
|
|||||||
Cash
Paid for Interest, Net of Capitalized Amounts
|
$
|
17,461
|
$
|
15,028
|
|||
Cash
Paid for Income Taxes, Net of Refunds
|
5,656
|
3,590
|
|||||
Noncash
Acquisitions Under Capital Leases
|
1,780
|
738
|
|||||
Construction
Expenditures Included in Accounts Payable at June 30,
|
5,943
|
1,635
|
|||||
See
Condensed Notes to Condensed Financial Statements of Registrant
Subsidiaries.
|
Footnote
Reference
|
|
Significant
Accounting Matters
|
Note
1
|
New
Accounting Pronouncements
|
Note
2
|
Rate
Matters
|
Note
3
|
Commitments
and Contingencies
|
Note
5
|
Guarantees
|
Note
6
|
Company-wide
Staffing and Budget Review
|
Note
7
|
Benefit
Plans
|
Note
9
|
Income
Taxes
|
Note
10
|
Business Segments |
Note 11
|
Financing
Activities
|
Note
12
|
Second
Quarter of 2005
|
$
|
19
|
|||||
Changes
in Gross Margin:
|
|||||||
Retail
and Off-system Sales Margins (a)
|
9
|
||||||
Transmission
Revenues
|
2
|
||||||
Other
|
7
|
||||||
Total
Change in Gross Margin
|
18
|
||||||
Changes
in Operating Expenses and Other:
|
|||||||
Other
Operation and Maintenance
|
(1
|
)
|
|||||
Interest
Expense
|
(1
|
)
|
|||||
Total
Change in Operating Expenses and Other
|
(2
|
)
|
|||||
Income
Tax Expense
|
(7
|
)
|
|||||
Second
Quarter of 2006
|
$
|
28
|
(a)
|
Includes
firm wholesale sales to municipals and
cooperatives.
|
·
|
Retail
and Off-system Sales Margins increased $9 million due to an increase
in
wholesale margins resulting from higher prices, partially offset
by
decreased off-system sales margins due to lower optimization activities
and a reduction in physical off-system sales under the SIA.
|
·
|
Transmission
Revenues increased $2 million primarily due to higher rates within
SPP.
|
·
|
Other
revenues increased $7 million primarily due to gains on sales of
emission
allowances.
|
Six
Months Ended June 30, 2005
|
$
|
32
|
|||||
Changes
in Gross Margin:
|
|||||||
Retail
and Off-system Sales Margins (a)
|
25
|
||||||
Transmission
Revenues
|
2
|
||||||
Other
|
15
|
||||||
Total
Change in Gross Margin
|
42
|
||||||
Changes
in Operating Expenses and Other:
|
|||||||
Other
Operation and Maintenance
|
(15
|
)
|
|||||
Interest
Expense
|
(1
|
)
|
|||||
Total
Change in Operating Expenses and Other
|
(16
|
)
|
|||||
Income
Tax Expense
|
(12
|
)
|
|||||
Six
Months Ended June 30, 2006
|
$
|
46
|
(a)
|
Includes
firm wholesale sales to municipals and
cooperatives.
|
·
|
Retail
and Off-system Sales Margins increased $25 million primarily due
to an
increase in wholesale margins resulting from higher prices, partially
offset by decreased off-system sales margins due to lower optimization
activities and a reduction in physical off-system sales under the
SIA.
|
·
|
Transmission
Revenues increased $2 million primarily due to higher rates within
SPP.
|
·
|
Other
revenues increased $15 million primarily due to gains on sales
of emission
allowances.
|
·
|
Other
Operation and Maintenance expenses increased $15 million primarily
due to
an $11 million increase in power production and higher administrative
and
general expenses and a $4 million increase in maintenance performed
at
power plants during scheduled
outages.
|
Moody’s
|
S&P
|
Fitch
|
|||
First
Mortgage Bonds
|
A3
|
A-
|
A
|
||
Senior
Unsecured Debt
|
Baa1
|
BBB
|
A-
|
2006
|
2005
|
||||||
(in
thousands)
|
|||||||
Cash
and Cash Equivalents at Beginning of Period
|
$
|
3,049
|
$
|
3,715
|
|||
Net
Cash Flows From (Used For):
|
|||||||
Operating
Activities
|
76,154
|
99,285
|
|||||
Investing
Activities
|
(123,275
|
)
|
(216,468
|
)
|
|||
Financing
Activities
|
46,180
|
118,059
|
|||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
(941
|
)
|
876
|
||||
Cash
and Cash Equivalents at End of Period
|
$
|
2,108
|
$
|
4,591
|
Principal
Amount
|
Interest
|
Due
|
|||||
Type
of Debt
|
Rate
|
Date
|
|||||
(in
thousands)
|
(%)
|
||||||
Pollution
Control Bonds
|
$
|
81,700
|
Variable
|
2018
|
Principal
Amount
|
Interest
|
Due
|
|||||
Type
of Debt
|
Rate
|
Date
|
|||||
(in
thousands)
|
(%)
|
||||||
Notes
Payable
|
$
|
3,394
|
4.47
|
2011
|
|||
Notes
Payable
|
1,500
|
Variable
|
2008
|
||||
Pollution
Control Bonds
|
81,700
|
6.10
|
2018
|
MTM
Risk Management Contracts
|
Cash
Flow Hedges
|
Total
|
||||||||
Current
Assets
|
$
|
83,938
|
$
|
-
|
$
|
83,938
|
||||
Noncurrent
Assets
|
46,983
|
-
|
46,983
|
|||||||
Total
MTM Derivative Contract Assets
|
130,921
|
-
|
130,921
|
|||||||
Current
Liabilities
|
(64,677
|
)
|
(90
|
)
|
(64,767
|
)
|
||||
Noncurrent
Liabilities
|
(35,644
|
)
|
(20
|
)
|
(35,664
|
)
|
||||
Total
MTM Derivative Contract Liabilities
|
(100,321
|
)
|
(110
|
)
|
(100,431
|
)
|
||||
Total
MTM Derivative Contract Net Assets (Liabilities)
|
$
|
30,600
|
$
|
(110
|
)
|
$
|
30,490
|
Total
MTM Risk Management Contract Net Assets at December 31,
2005
|
$
|
16,387
|
||
(Gain)
Loss from Contracts Realized/Settled During the Period and Entered
in a
Prior Period
|
(305
|
)
|
||
Fair
Value of New Contracts at Inception When Entered During the Period
(a)
|
52
|
|||
Net
Option Premiums Paid/(Received) for Unexercised or Unexpired Option
Contracts Entered During the Period
|
8,907
|
|||
Change
in Fair Value Due to Valuation Methodology Changes on Forward
Contracts
|
139
|
|||
Changes
in Fair Value Due to Market Fluctuations During the Period
(b)
|
(1,694
|
)
|
||
Changes
Due to SIA and CSW Operating Agreement (c)
|
11,900
|
|||
Changes
in Fair Value Allocated to Regulated Jurisdictions (d)
|
(4,786
|
)
|
||
Total
MTM Risk Management Contract Net Assets
|
30,600
|
|||
Net
Cash Flow Hedge Contracts
|
(110
|
)
|
||
Total
MTM Risk Management Contract Net Assets at June 30,
2006
|
$
|
30,490
|
(a)
|
Most
of the fair value comes from longer term fixed price contracts
with
customers that seek 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)
|
See
“Allocation Agreement between AEP East companies and AEP West companies
and CSW Operating Agreement” section of Note 3.
|
(d)
|
“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
our total MTM asset or liability (external sources or modeled
internally).
|
·
|
The
maturity, by year, of our net assets/liabilities giving an indication
of
when these MTM amounts will settle and generate
cash.
|
Remainder
2006
|
2007
|
2008
|
2009
|
2010
|
After
2010
|
Total
|
||||||||||||||||
Prices
Actively Quoted - Exchange Traded
Contracts
|
$
|
(1,028
|
)
|
$
|
(2,196
|
)
|
$
|
695
|
$
|
(143
|
)
|
$
|
-
|
$
|
-
|
$
|
(2,672
|
)
|
||||
Prices
Provided by Other External Sources
- OTC Broker Quotes (a)
|
6,966
|
7,419
|
10,919
|
465
|
-
|
-
|
25,769
|
|||||||||||||||
Prices
Based on Models and Other Valuation
Methods (b)
|
10,611
|
(796
|
)
|
(2,276
|
)
|
(31
|
)
|
(3
|
)
|
(2
|
)
|
7,503
|
||||||||||
Total
|
$
|
16,549
|
$
|
4,427
|
$
|
9,338
|
$
|
291
|
$
|
(3
|
)
|
$
|
(2
|
)
|
$
|
30,600
|
(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 pricing
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.
|
Power
|
Interest
Rate
|
Total
|
||||||||||
Beginning
Balance in AOCI December 31, 2005
|
$
|
(736
|
)
|
$
|
(5,116
|
)
|
$
|
(5,852
|
)
|
|||
Changes
in Fair Value
|
14
|
(54
|
)
|
(40
|
)
|
|||||||
Impact
due to Change in SIA (a)
|
591
|
-
|
591
|
|||||||||
Reclassifications
from AOCI to Net Income for Cash
Flow Hedges Settled
|
144
|
269
|
413
|
|||||||||
Ending
Balance in AOCI June 30, 2006
|
$
|
13
|
$
|
(4,901
|
)
|
$
|
(4,888
|
)
|
(a)
|
See
“Allocation Agreement between AEP East companies and AEP West companies
and CSW Operating Agreement” section of Note
3.
|
Six
Months Ended
June
30, 2006
|
Twelve
Months Ended
December
31, 2005
|
||||||||||||||||
(in
thousands)
|
(in
thousands)
|
||||||||||||||||
End
|
High
|
Average
|
Low
|
End
|
High
|
Average
|
Low
|
||||||||||
$705
|
$1,674
|
$638
|
$68
|
$363
|
$604
|
$287
|
$104
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
REVENUES
|
|||||||||||||
Electric
Generation, Transmission and Distribution
|
$
|
349,650
|
$
|
326,046
|
$
|
643,643
|
$
|
555,854
|
|||||
Sales
to AEP Affiliates
|
9,414
|
6,837
|
20,179
|
23,959
|
|||||||||
Other
|
420
|
(32
|
)
|
794
|
249
|
||||||||
TOTAL
|
359,484
|
332,851
|
664,616
|
580,062
|
|||||||||
EXPENSES
|
|||||||||||||
Fuel
and Other Consumables for Electric Generation
|
118,271
|
116,397
|
208,932
|
206,815
|
|||||||||
Purchased
Electricity for Resale
|
44,884
|
32,803
|
74,102
|
46,183
|
|||||||||
Purchased
Electricity from AEP Affiliates
|
16,826
|
22,003
|
40,163
|
27,867
|
|||||||||
Other
Operation
|
53,299
|
47,496
|
103,082
|
92,111
|
|||||||||
Maintenance
|
22,231
|
27,645
|
46,888
|
43,360
|
|||||||||
Depreciation
and Amortization
|
32,876
|
33,257
|
65,410
|
65,650
|
|||||||||
Taxes
Other Than Income Taxes
|
16,165
|
15,887
|
32,147
|
31,550
|
|||||||||
TOTAL
|
304,552
|
295,488
|
570,724
|
513,536
|
|||||||||
OPERATING
INCOME
|
54,932
|
37,363
|
93,892
|
66,526
|
|||||||||
Other
Income
|
840
|
1,146
|
1,568
|
2,250
|
|||||||||
Interest
Expense
|
(14,073
|
)
|
(12,901
|
)
|
(26,844
|
)
|
(25,681
|
)
|
|||||
INCOME
BEFORE INCOME TAXES AND MINORITY
INTEREST EXPENSE
|
41,699
|
25,608
|
68,616
|
43,095
|
|||||||||
Income
Tax Expense
|
12,491
|
5,490
|
21,314
|
9,886
|
|||||||||
Minority
Interest Expense
|
896
|
814
|
1,118
|
1,700
|
|||||||||
NET
INCOME
|
28,312
|
19,304
|
46,184
|
31,509
|
|||||||||
Preferred
Stock Dividend Requirements
|
58
|
58
|
115
|
115
|
|||||||||
EARNINGS
APPLICABLE TO COMMON STOCK
|
$
|
28,254
|
$
|
19,246
|
$
|
46,069
|
$
|
31,394
|
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, 2004
|
$
|
135,660
|
$
|
245,003
|
$
|
389,135
|
$
|
(1,180
|
)
|
$
|
768,618
|
|||||
Common
Stock Dividends
|
(25,000
|
)
|
(25,000
|
)
|
||||||||||||
Preferred
Stock Dividends
|
(115
|
)
|
(115
|
)
|
||||||||||||
TOTAL
|
743,503
|
|||||||||||||||
COMPREHENSIVE
INCOME
|
||||||||||||||||
Other
Comprehensive Loss, Net of Taxes:
|
||||||||||||||||
Cash
Flow Hedges, Net of Tax of $2,807
|
(5,212
|
)
|
(5,212
|
)
|
||||||||||||
NET
INCOME
|
31,509
|
31,509
|
||||||||||||||
TOTAL
COMPREHENSIVE INCOME
|
26,297
|
|||||||||||||||
JUNE
30, 2005
|
$
|
135,660
|
$
|
245,003
|
$
|
395,529
|
$
|
(6,392
|
)
|
$
|
769,800
|
|||||
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
|
2006
|
2005
|
||||||
CURRENT
ASSETS
|
|||||||
Cash
and Cash Equivalents
|
$
|
2,108
|
$
|
3,049
|
|||
Accounts
Receivable:
|
|||||||
Customers
|
75,318
|
47,515
|
|||||
Affiliated
Companies
|
35,105
|
49,226
|
|||||
Miscellaneous
|
9,596
|
7,984
|
|||||
Allowance
for Uncollectible Accounts
|
(180
|
)
|
(548
|
)
|
|||
Total Accounts Receivable
|
119,839
|
104,177
|
|||||
Fuel
|
59,540
|
40,333
|
|||||
Materials
and Supplies
|
38,617
|
34,821
|
|||||
Risk
Management Assets
|
83,938
|
47,319
|
|||||
Regulatory
Asset for Under-Recovered Fuel Costs
|
11,595
|
51,387
|
|||||
Margin
Deposits
|
66,578
|
13,740
|
|||||
Prepayments
and Other
|
17,369
|
20,270
|
|||||
TOTAL
|
399,584
|
315,096
|
|||||
PROPERTY,
PLANT AND EQUIPMENT
|
|||||||
Electric:
|
|||||||
Production
|
1,677,767
|
1,660,392
|
|||||
Transmission
|
659,965
|
645,297
|
|||||
Distribution
|
1,185,955
|
1,153,026
|
|||||
Other
|
450,255
|
443,749
|
|||||
Construction
Work in Progress
|
121,433
|
104,175
|
|||||
Total
|
4,095,375
|
4,006,639
|
|||||
Accumulated
Depreciation and Amortization
|
1,801,261
|
1,776,216
|
|||||
TOTAL
- NET
|
2,294,114
|
2,230,423
|
|||||
OTHER
NONCURRENT ASSETS
|
|||||||
Regulatory
Assets
|
105,906
|
81,776
|
|||||
Long-term
Risk Management Assets
|
46,983
|
39,796
|
|||||
Employee
Benefits and Pension Assets
|
80,967
|
83,330
|
|||||
Deferred
Charges and Other
|
64,634
|
46,926
|
|||||
TOTAL
|
298,490
|
251,828
|
|||||
TOTAL
ASSETS
|
$
|
2,992,188
|
$
|
2,797,347
|
2006
|
2005
|
||||||
CURRENT
LIABILITIES
|
(in
thousands)
|
||||||
Advances
from Affiliates
|
$
|
93,083
|
$
|
28,210
|
|||
Accounts
Payable:
|
|||||||
General
|
100,275
|
71,138
|
|||||
Affiliated
Companies
|
82,145
|
53,019
|
|||||
Short-term
Debt - Nonaffiliated
|
10,249
|
1,394
|
|||||
Long-term
Debt Due Within One Year - Nonaffiliated
|
19,470
|
15,755
|
|||||
Risk
Management Liabilities
|
64,767
|
45,098
|
|||||
Customer
Deposits
|
54,611
|
50,848
|
|||||
Accrued
Taxes
|
61,952
|
42,799
|
|||||
Other
|
60,368
|
82,699
|
|||||
TOTAL
|
546,920
|
390,960
|
|||||
NONCURRENT
LIABILITIES
|
|||||||
Long-term
Debt - Nonaffiliated
|
670,457
|
678,886
|
|||||
Long-term
Debt - Affiliated
|
50,000
|
50,000
|
|||||
Long-term
Risk Management Liabilities
|
35,664
|
27,083
|
|||||
Deferred
Income Taxes
|
389,969
|
409,513
|
|||||
Regulatory
Liabilities and Deferred Investment Tax Credits
|
355,092
|
320,066
|
|||||
Deferred
Credits and Other
|
128,790
|
131,477
|
|||||
TOTAL
|
1,629,972
|
1,617,025
|
|||||
TOTAL
LIABILITIES
|
2,176,892
|
2,007,985
|
|||||
Minority
Interest
|
1,185
|
2,284
|
|||||
Cumulative
Preferred Stock Not Subject to Mandatory Redemption
|
4,700
|
4,700
|
|||||
Commitments
and Contingencies (Note 5)
|
|||||||
COMMON
SHAREHOLDER’S EQUITY
|
|||||||
Common
Stock - $18 Par Value Per Share:
|
|||||||
Authorized
- 7,600,000 Shares
|
|||||||
Outstanding
- 7,536,640 Shares
|
135,660
|
135,660
|
|||||
Paid-in
Capital
|
245,003
|
245,003
|
|||||
Retained
Earnings
|
433,913
|
407,844
|
|||||
Accumulated
Other Comprehensive Income (Loss)
|
(5,165
|
)
|
(6,129
|
)
|
|||
TOTAL
|
809,411
|
782,378
|
|||||
TOTAL
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
2,992,188
|
$
|
2,797,347
|
2006
|
2005
|
||||||
OPERATING
ACTIVITIES
|
|||||||
Net
Income
|
$
|
46,184
|
$
|
31,509
|
|||
Adjustments
for Noncash Items:
|
|||||||
Depreciation
and Amortization
|
65,410
|
65,650
|
|||||
Deferred
Income Taxes
|
(15,511
|
)
|
176
|
||||
Mark-to-Market
of Risk Management Contracts
|
(14,213
|
)
|
13,031
|
||||
Deferred
Property Taxes
|
(18,593
|
)
|
(19,047
|
)
|
|||
Change
in Other Noncurrent Assets
|
16,704
|
3,269
|
|||||
Change
in Other Noncurrent Liabilities
|
(16,419
|
)
|
(20,799
|
)
|
|||
Changes
in Components of Working Capital:
|
|||||||
Accounts
Receivable, Net
|
(15,662
|
)
|
13,224
|
||||
Fuel,
Materials and Supplies
|
(23,003
|
)
|
1,562
|
||||
Accounts
Payable
|
60,158
|
27,729
|
|||||
Accrued
Taxes, Net
|
19,153
|
959
|
|||||
Over/Under Fuel Recovery, Net | 37,377 | (24,890 | ) | ||||
Margin
Deposits
|
(52,838
|
)
|
2,078
|
||||
Other
Current Assets
|
3,560
|
3,670
|
|||||
Other
Current Liabilities
|
(16,153
|
)
|
1,164
|
||||
Net
Cash Flows From Operating Activities
|
76,154
|
99,285
|
|||||
INVESTING
ACTIVITIES
|
|||||||
Construction
Expenditures
|
(122,616
|
)
|
(72,490
|
)
|
|||
Change
in Advances to Affiliates, Net
|
-
|
(148,971
|
)
|
||||
Other
|
(659
|
)
|
4,993
|
||||
Net
Cash Flows Used For Investing Activities
|
(123,275
|
)
|
(216,468
|
)
|
|||
FINANCING
ACTIVITIES
|
|||||||
Issuance
of Long-term Debt - Nonaffiliated
|
80,593
|
148,895
|
|||||
Change
in Short-term Debt, Net - Nonaffiliated
|
8,855
|
-
|
|||||
Retirement
of Long-term Debt - Nonaffiliated
|
(86,594
|
)
|
(4,915
|
)
|
|||
Change
in Advances from Affiliates, Net
|
64,873
|
-
|
|||||
Principal
Payments for Capital Lease Obligations
|
(1,432
|
)
|
(806
|
)
|
|||
Dividends
Paid on Common Stock
|
(20,000
|
)
|
(25,000
|
)
|
|||
Dividends
Paid on Cumulative Preferred Stock
|
(115
|
)
|
(115
|
)
|
|||
Net
Cash Flows From Financing Activities
|
46,180
|
118,059
|
|||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
(941
|
)
|
876
|
||||
Cash
and Cash Equivalents at Beginning of Period
|
3,049
|
3,715
|
|||||
Cash
and Cash Equivalents at End of Period
|
$
|
2,108
|
$
|
4,591
|
|||
SUPPLEMENTARY
INFORMATION
|
|||||||
Cash
Paid for Interest, Net of Capitalized Amounts
|
$
|
24,840
|
$
|
22,279
|
|||
Cash
Paid for Income Taxes, Net of Refunds
|
42,788
|
35,969
|
|||||
Noncash
Acquisitions Under Capital Leases
|
5,537
|
2,035
|
|||||
Construction
Expenditures Included in Accounts Payable at June 30,
|
8,326
|
2,759
|
|||||
See
Condensed Notes to Condensed Financial Statements of Registrant
Subsidiaries.
|
Footnote
Reference
|
|
Significant
Accounting Matters
|
Note
1
|
New
Accounting Pronouncements
|
Note
2
|
Rate
Matters
|
Note
3
|
Customer
Choice and Industry Restructuring
|
Note
4
|
Commitments
and Contingencies
|
Note
5
|
Guarantees
|
Note
6
|
Company-wide
Staffing and Budget Review
|
Note
7
|
Benefit
Plans
|
Note
9
|
Income
Taxes
|
Note
10
|
Business
Segments
|
Note
11
|
Financing
Activities
|
Note
12
|
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
|
AEGCo,
APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC, TNC
|
2.
|
New
Accounting Pronouncements
|
AEGCo,
APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC, TNC
|
3.
|
Rate
Matters
|
APCo,
CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC, TNC
|
4.
|
Customer
Choice and Industry
Restructuring
|
CSPCo,
OPCo, SWEPCo, TCC, TNC
|
5.
|
Commitments
and Contingencies
|
AEGCo,
APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC, TNC
|
6.
|
Guarantees
|
AEGCo,
APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC, TNC
|
7.
|
Company-wide
Staffing and Budget Review
|
AEGCo,
APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC, TNC
|
8.
|
Assets
Held for Sale
|
TCC
|
9.
|
Benefit
Plans
|
APCo,
CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC, TNC
|
10.
|
Income
Taxes
|
PSO,
SWEPCo, TCC, TNC
|
11.
|
Business
Segments
|
AEGCo,
APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC, TNC
|
12.
|
Financing
Activities
|
AEGCo,
APCo, CSPCo, I&M, KPCo, OPCo, PSO, SWEPCo, TCC,
TNC
|
|
|
|
June
30,
|
|
|
December
31,
|
|
|
|
|
2006
|
|
|
2005
|
|
|
(in
thousands)
|
||||||
Components
|
|||||||
Cash
Flow Hedges:
|
|||||||
APCo
|
$
|
1,577
|
$
|
(16,421
|
)
|
||
CSPCo
|
6,002
|
(859
|
)
|
||||
I&M
|
5,234
|
(3,467
|
)
|
||||
KPCo
|
2,550
|
(194
|
)
|
||||
OPCo
|
11,355
|
755
|
|||||
PSO
|
(416
|
)
|
(1,112
|
)
|
|||
SWEPCo
|
(4,888
|
)
|
(5,852
|
)
|
|||
TCC
|
-
|
(224
|
)
|
||||
TNC
|
2,429
|
(111
|
)
|
||||
Minimum
Pension Liability:
|
|||||||
APCo
|
$
|
(189
|
)
|
$
|
(189
|
)
|
|
CSPCo
|
(21
|
)
|
(21
|
)
|
|||
I&M
|
(102
|
)
|
(102
|
)
|
|||
KPCo
|
(29
|
)
|
(29
|
)
|
|||
PSO
|
(152
|
)
|
(152
|
)
|
|||
SWEPCo
|
(277
|
)
|
(277
|
)
|
|||
TCC
|
(928
|
)
|
(928
|
)
|
|||
TNC
|
(393
|
)
|
(393
|
)
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
Company
|
2006
|
2005
|
2006
|
2005
|
|||||||||
(in
thousands)
|
|||||||||||||
APCo
|
$
|
20,680
|
$
|
18,311
|
$
|
42,654
|
$
|
35,263
|
|||||
CSPCo
|
5,899
|
5,054
|
11,564
|
9,648
|
|||||||||
I&M
|
10,512
|
8,671
|
19,064
|
14,784
|
|||||||||
OPCo
|
20,693
|
16,091
|
39,323
|
31,054
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
||||||||||||
Company
|
2006
|
2005
|
2006
|
2005
|
|||||||||
(in
thousands)
|
|||||||||||||
PSO
|
$
|
14,443
|
$
|
10,152
|
$
|
26,136
|
$
|
23,449
|
|||||
SWEPCo
|
13,208
|
12,164
|
30,755
|
19,658
|
|||||||||
TCC
|
121
|
1,285
|
703
|
3,357
|
|||||||||
TNC
|
398
|
8,025
|
4,229
|
13,677
|
·
|
A
$50 million increase in Expanded Net Energy Cost (ENEC) for fuel
and
purchased power expenses;
|
·
|
A
$21 million special construction surcharge providing recovery of
the costs
of scrubbers and the Wyoming-Jacksons Ferry 765 kV line to
date;
|
·
|
A
$16 million general base rate reduction based on a return of equity
of
10.5%, of which $9 million relates to a reduction in depreciation
expense
which affects cash flows but not earnings; and
|
·
|
A
$15 million credit to refund a portion of deferred prior over-recoveries
of ENEC costs, currently recorded in regulatory liabilities on the
Condensed Consolidated Balance Sheets. Therefore, this item impacts
cash
flows but has no effect on
earnings.
|
June
30, 2006
|
December
31, 2005
|
||||||||||||
PJM-Billed
Integration Costs
|
Non-PJM
Billed Formation/ Integration Costs
|
PJM-Billed
Integration Costs
|
Non-PJM
Billed Formation/ Integration Costs
|
||||||||||
(in
millions)
|
|||||||||||||
APCo
|
$
|
3.8
|
$
|
4.9
|
$
|
4.1
|
$
|
4.9
|
|||||
CSPCo
|
1.5
|
1.9
|
1.7
|
1.9
|
|||||||||
I&M
|
3.0
|
3.5
|
3.2
|
3.7
|
|||||||||
KPCo
|
0.9
|
1.1
|
1.0
|
1.1
|
|||||||||
OPCo
|
4.4
|
5.1
|
4.7
|
5.1
|
Three
Months Ended
|
Six
Months Ended
|
Total
Net SECA Revenues
|
|||||||||||||
June
30,
|
June
30,
|
Through
|
|||||||||||||
2006
|
2005
|
2006
|
2005
|
June
2006
|
|||||||||||
(in
millions)
|
|||||||||||||||
APCo
|
$
|
-
|
$
|
10.4
|
$
|
11.0
|
$
|
19.0
|
$
|
55.5
|
|||||
CSPCo
|
-
|
5.3
|
6.5
|
9.6
|
30.8
|
||||||||||
I&M
|
-
|
5.9
|
6.7
|
10.8
|
32.7
|
||||||||||
KPCo
|
-
|
2.5
|
2.7
|
4.5
|
13.2
|
||||||||||
OPCo
|
-
|
7.4
|
8.6
|
13.5
|
42.2
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
APCo
|
$
|
5.7
|
$
|
0.4
|
$
|
6.1
|
$
|
0.4
|
|||||
CSPCo
|
3.2
|
0.2
|
3.4
|
0.2
|
|||||||||
I&M
|
3.4
|
0.2
|
3.6
|
0.2
|
|||||||||
KPCo
|
1.4
|
0.1
|
1.4
|
0.1
|
|||||||||
OPCo
|
4.3
|
0.3
|
4.6
|
0.3
|
·
|
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
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.
|
|
·
|
In
a competing Highway/Byway proposal, a group of LSEs proposed rates
that
would include 500 kV and higher existing facilities and some facilities
at
lower voltages in the Highway rate.
|
|
·
|
Another
proposal uses facilities 200 kV or higher in the Highway rate.
|
|
·
|
In
January 2006, the FERC staff issued testimony and exhibits supporting
a
PJM-wide flat rate or “Postage Stamp” type of rate design that would
include all transmission
facilities.
|
·
|
The
AEP/AP Highway/Byway rate design would result in incremental net
revenues
of approximately $125 million per year for the transmission-owning
AEP
East companies.
|
·
|
The
competing Highway/Byway proposals filed by others would also produce
incremental net revenues to the AEP East transmission-owning companies,
but at a much lower level.
|
·
|
The
staff rate design would produce slightly more net revenue for AEP
than the
original AEP/AP proposal, when fully effective; however, the staff
recommended a phase-in plan that would take an estimated six years
to
complete.
|
·
|
In
Kentucky, KPCo settled a rate case, which provided for the recovery
of its
share of the transmission revenue reduction starting March 30,
2006.
|
·
|
In
Ohio, CSPCo and OPCo are recovering the FERC approved OATT, which
reflects
their share of the full transmission revenue requirement retroactive
to
April 1, 2006 under a May 2006 PUCO order.
|
·
|
In
West Virginia, APCo settled a rate case, which provided for the recovery
of its share of the T&O/SECA transmission revenue reductions beginning
July 28, 2006.
|
·
|
In
Virginia, APCo filed a request for revised rates, which includes
recovery
of its share of the T&O/SECA transmission revenue reductions starting
October 2, 2006, subject to refund.
|
·
|
In
Indiana, I&M is precluded by a rate cap from raising its rates until
July 1, 2007.
|
(in
millions)
|
||||
Stranded
Generation Plant Costs
|
$
|
974
|
||
Net
Generation-related Regulatory Asset
|
249
|
|||
Excess
Earnings
|
(49
|
)
|
||
Recorded
Net Stranded Generation Plant Costs
|
1,174
|
|||
Recorded
Debt Carrying Costs on Net Stranded Generation Plant Costs
|
375
|
|||
Recorded
Securitizable True-up Regulatory Asset
|
1,549
|
|||
Unrecorded
But Recoverable Equity Carrying Costs
|
217
|
|||
Unrecorded
Estimated July 2006 - August 2006 Debt Carrying Costs
|
17
|
|||
Unrecorded
Excess Earnings, Related Carrying Costs and Other
|
52
|
|||
Settlement
Reduction
|
(77
|
)
|
||
Reduction
for the ADITC and EDFIT Benefits
|
(61
|
)
|
||
Approved
Securitizable Amount
|
1,697
|
|||
Unrecorded
Securitization Bond Issuance Costs
|
23
|
|||
Amount
to be Securitized
|
$
|
1,720
|
|
(in
millions)
|
|||
Wholesale
Capacity Auction True-up
|
$
|
61
|
||
Carrying
Costs on Wholesale Capacity Auction True-up
|
28
|
|||
Retail
Clawback including Carrying Costs
|
(63
|
)
|
||
Deferred
Over-recovered Fuel Balance
|
(181
|
)
|
||
Retrospective
ADFIT Benefit
|
(70
|
)
|
||
Other
|
(4
|
)
|
||
Recorded
Net Regulatory Liabilities - Other True-up Items
|
(229
|
)
|
||
Unrecorded
Prospective ADFIT Benefit
|
(240
|
)
|
||
Unrecorded
Estimated July 2006 - August 2006 Carrying Costs
|
(6
|
)
|
||
Gross
CTC Refund Proposed
|
(475
|
)
|
||
FERC
Jurisdictional Fuel Refund Deferral
|
16
|
|||
ADITC
and EDFIT Benefit Refund Deferral
|
97
|
|||
Net
CTC Refund Proposed, After Deferrals
|
(362
|
)
|
||
Rate
Case Expense Surcharge
|
7
|
|||
Net
Refund Proposed, After Deferrals and Expenses
|
$
|
(355
|
)
|
|
(in
millions)
|
|||
AEGCo
|
$
|
12
|
||
APCo
|
928
|
|||
CSPCo
|
319
|
|||
I&M
|
330
|
|||
KPCo
|
54
|
|||
OPCo
|
1,065
|
|||
PSO
|
262
|
|||
SWEPCo
|
315
|
|||
TCC
|
286
|
|||
TNC
|
72
|
Maximum
Potential Loss
|
||||
Subsidiary
|
(in
millions)
|
|||
APCo
|
$
|
7
|
||
CSPCo
|
3
|
|||
I&M
|
5
|
|||
KPCo
|
2
|
|||
OPCo
|
7
|
|||
PSO
|
5
|
|||
SWEPCo
|
6
|
|||
TCC
|
6
|
|||
TNC
|
3
|
Company
|
|
|
Amounts
(in
millions)
|
|
AEGCo
|
$
|
0.2
|
||
APCo
|
3.9
|
|||
CSPCo
|
2.3
|
|||
I&M
|
4.0
|
|||
KPCo
|
0.7
|
|||
OPCo
|
3.4
|
|||
PSO
|
1.2
|
|||
SWEPCo
|
1.6
|
|||
TCC
|
3.8
|
|||
TNC
|
1.1
|
Texas
Plants (TCC)
|
June
30, 2006
|
|
|
December
31, 2005
|
|||
Assets:
|
(in
millions)
|
||||||
Other
Current Assets
|
$
|
2
|
$
|
1
|
|||
Property,
Plant and Equipment, Net
|
44
|
43
|
|||||
Total
Assets Held for Sale - Texas Generation Plants
|
$
|
46
|
$
|
44
|
|||
Three
Months Ended June 30, 2006 and 2005:
|
Pension
Plans
|
Other
Postretirement Benefit Plans
|
|||||||||||
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
||||
|
(in
millions)
|
||||||||||||
Service
Cost
|
$
|
24
|
$
|
23
|
$
|
10
|
$
|
10
|
|||||
Interest
Cost
|
57
|
56
|
25
|
26
|
|||||||||
Expected
Return on Plan Assets
|
(83
|
)
|
(78
|
)
|
(23
|
)
|
(22
|
)
|
|||||
Amortization
of Transition Obligation
|
-
|
-
|
7
|
7
|
|||||||||
Amortization
of Net Actuarial Loss
|
19
|
14
|
5
|
7
|
|||||||||
Net
Periodic Benefit Cost
|
$
|
17
|
$
|
15
|
$
|
24
|
$
|
28
|
Six
Months Ended June 30, 2006 and 2005:
|
Pension
Plans
|
Other
Postretirement Benefit Plans
|
|||||||||||
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
(in
millions)
|
||||||||||||
Service
Cost
|
$
|
48
|
$
|
46
|
$
|
20
|
$
|
21
|
|||||
Interest
Cost
|
114
|
112
|
50
|
53
|
|||||||||
Expected
Return on Plan Assets
|
(166
|
)
|
(155
|
)
|
(46
|
)
|
(45
|
)
|
|||||
Amortization
of Transition Obligation
|
-
|
-
|
14
|
14
|
|||||||||
Amortization
of Net Actuarial Loss
|
39
|
27
|
10
|
14
|
|||||||||
Net
Periodic Benefit Cost
|
$
|
35
|
$
|
30
|
$
|
48
|
$
|
57
|
Three
Months Ended June 30, 2006 and 2005:
|
Pension
Plans
|
Other
Postretirement Benefit Plans
|
|||||||||||
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
(in
thousands)
|
|||||||||||
APCo
|
$
|
1,469
|
$
|
1,848
|
$
|
4,489
|
$
|
5,147
|
|||||
CSPCo
|
205
|
534
|
1,805
|
2,123
|
|||||||||
I&M
|
2,330
|
2,365
|
2,953
|
3,464
|
|||||||||
KPCo
|
358
|
376
|
513
|
571
|
|||||||||
OPCo
|
829
|
1,206
|
3,396
|
3,632
|
|||||||||
PSO
|
979
|
72
|
1,588
|
1,799
|
|||||||||
SWEPCo
|
1,225
|
364
|
1,578
|
1,765
|
|||||||||
TCC
|
772
|
(219
|
)
|
1,696
|
1,935
|
||||||||
TNC
|
327
|
41
|
715
|
846
|
Six
Months Ended June 30, 2006 and 2005:
|
Pension
Plans
|
Other
Postretirement Benefit Plans
|
|||||||||||
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
|
(in
thousands)
|
|||||||||||
APCo
|
$
|
2,937
|
$
|
3,696
|
$
|
8,978
|
$
|
10,492
|
|||||
CSPCo
|
410
|
1,068
|
3,610
|
4,345
|
|||||||||
I&M
|
4,661
|
4,730
|
5,906
|
7,095
|
|||||||||
KPCo
|
716
|
752
|
1,026
|
1,174
|
|||||||||
OPCo
|
1,655
|
2,412
|
6,792
|
7,459
|
|||||||||
PSO
|
1,956
|
144
|
3,176
|
3,668
|
|||||||||
SWEPCo
|
2,450
|
728
|
3,156
|
3,602
|
|||||||||
TCC
|
1,545
|
(438
|
)
|
3,392
|
3,943
|
||||||||
TNC
|
652
|
82
|
1,430
|
1,723
|
Company
|
|
|
Decrease
in SFAS 109 Regulatory Asset, Net
|
|
|
Decrease
in State Income Tax Expense
|
|
|
Decrease
in Deferred State Income Tax Liabilities
|
|
TCC
|
$
|
36,315
|
$
|
-
|
$
|
36,315
|
||||
TNC
|
4,801
|
1,265
|
6,066
|
|||||||
PSO
|
-
|
3,273
|
3,273
|
|||||||
SWEPCo
|
4,438
|
501
|
4,939
|
Company
|
Type
of Debt
|
Principal
Amount
|
Interest
Rate
|
Due
Date
|
|||||
(in
thousands)
|
(%)
|
||||||||
Issuances:
|
|||||||||
APCo
|
Pollution
Control Bonds
|
$
|
50,275
|
Variable
|
2036
|
||||
APCo
|
Senior
Unsecured Notes
|
250,000
|
5.55
|
2011
|
|||||
APCo
|
Senior
Unsecured Notes
|
250,000
|
6.375
|
2036
|
|||||
I&M
|
Pollution
Control Bonds
|
50,000
|
Variable
|
2025
|
|||||
OPCo
|
Pollution
Control Bonds
|
65,000
|
Variable
|
2036
|
|||||
OPCo
|
Senior
Unsecured Notes
|
350,000
|
6.00
|
2016
|
|||||
SWEPCo
|
Pollution
Control Bonds
|
81,700
|
Variable
|
2018
|
Company
|
Type
of Debt
|
Principal
Amount
|
Interest
Rate
|
Due
Date
|
|||||
(in
thousands)
|
(%)
|
||||||||
Retirements
and Principal Payments:
|
|||||||||
APCo
|
First
Mortgage Bonds
|
$
|
100,000
|
6.80
|
2006
|
||||
APCo
|
Other
|
5
|
13.718
|
2026
|
|||||
I&M
|
Pollution
Control Bonds
|
50,000
|
6.55
|
2025
|
|||||
OPCo
|
Notes
Payable
|
2,927
|
6.81
|
2008
|
|||||
OPCo
|
Notes
Payable
|
3,250
|
6.27
|
2009
|
|||||
SWEPCo
|
Notes
Payable
|
3,394
|
4.47
|
2011
|
|||||
SWEPCo
|
Notes
Payable
|
1,500
|
Variable
|
2008
|
|||||
SWEPCo
|
Pollution
Control Bonds
|
81,700
|
6.10
|
2018
|
|||||
TCC
|
Securitization
Bonds
|
30,641
|
5.01
|
2010
|
Company
|
Type
of Debt
|
Principal
Amount
|
Interest
Rate
|
Due
Date
|
|||||
(in
thousands)
|
(%)
|
||||||||
Issuances:
|
|||||||||
TCC
|
Notes
Payable
|
$
|
125,000
|
5.14
|
2007
|
||||
Retirements:
|
|||||||||
KPCo
|
Notes
Payable
|
40,000
|
6.501
|
2006
|
|||||
OPCo
|
Notes
Payable
|
200,000
|
3.32
|
2006
|
|||||
PSO
|
Notes
Payable
|
50,000
|
3.35
|
2006
|
Company
|
|
|
Maximum
Borrowings from Utility Money Pool
|
|
|
Maximum
Loans to Utility Money Pool
|
|
|
Average
Borrowings from Utility Money Pool
|
|
|
Average
Loans to Utility Money Pool
|
|
|
Loans
(Borrowings) to/from Utility Money Pool as of June 30,
2006
|
|
|
Authorized
Short-Term Borrowing Limit
|
|
|
(in
thousands)
|
||||||||||||||||||
AEGCo
|
$
|
58,209
|
$
|
2,247
|
$
|
19,213
|
$
|
2,247
|
$
|
(36,989
|
)
|
$
|
125,000
|
||||||
APCo
|
283,872
|
314,064
|
200,248
|
252,627
|
218,702
|
600,000
|
|||||||||||||
CSPCo
|
48,337
|
24,779
|
15,133
|
7,719
|
12,616
|
350,000
|
|||||||||||||
I&M
|
128,071
|
-
|
71,724
|
-
|
(57,749
|
)
|
500,000
|
||||||||||||
KPCo
|
46,156
|
11,993
|
20,478
|
4,384
|
(36,991
|
)
|
200,000
|
||||||||||||
OPCo
|
351,302
|
36,787
|
127,955
|
15,886
|
36,787
|
600,000
|
|||||||||||||
PSO
|
167,456
|
-
|
90,702
|
-
|
(139,831
|
)
|
300,000
|
||||||||||||
SWEPCo
|
127,291
|
-
|
59,388
|
-
|
(93,083
|
)
|
350,000
|
||||||||||||
TCC
|
117,429
|
49,193
|
46,872
|
27,343
|
(27,926
|
)
|
600,000
|
||||||||||||
TNC
|
14,513
|
34,574
|
4,571
|
8,680
|
(6,005
|
)
|
250,000
|
Company
|
|
|
Average
Interest Rate for Funds Borrowed from the Utility Money Pool
for
Six Months
Ended
June
30, 2006
|
|
|
Average
Interest
Rate
for Funds
Borrowed
from the
Utility
Money Pool
for
Six Months
Ended
June
30, 2005
|
|
|
Average
Interest Rate for Funds Loaned to the Utility Money Pool for Six
Months
Ended June 30, 2006
|
|
|
Average
Interest Rate for Funds Loaned to the Utility Money Pool for Six
Months
Ended June 30, 2005
|
|
|
(in
percentage)
|
||||||||||||
AEGCo
|
4.78
|
|
|
2.40
|
|
|
5.11
|
|
|
3.14
|
|
||
APCo
|
|
|
4.62
|
|
|
2.65
|
|
|
5.05
|
|
|
2.69
|
|
CSPCo
|
|
|
4.73
|
|
|
-
|
|
|
4.91
|
|
|
2.44
|
|
I&M
|
|
|
4.76
|
|
|
2.96
|
|
|
-
|
|
|
2.12
|
|
KPCo
|
|
|
4.98
|
|
|
2.96
|
|
|
4.97
|
|
|
2.42
|
|
OPCo
|
|
|
4.86
|
|
|
3.32
|
|
|
5.30
|
|
|
2.39
|
|
PSO
|
|
|
4.91
|
|
|
2.50
|
|
|
-
|
|
|
3.19
|
|
SWEPCo
|
|
|
4.92
|
|
|
3.21
|
|
|
-
|
|
|
2.54
|
|
TCC
|
|
|
4.64
|
|
|
2.91
|
|
|
4.74
|
|
|
2.12
|
|
TNC
|
|
|
4.81
|
|
|
-
|
|
|
4.62
|
|
|
2.65
|
|
|
(in
millions)
|
|||
AEGCo
|
$
|
12
|
||
APCo
|
928
|
|||
CSPCo
|
319
|
|||
I&M
|
330
|
|||
KPCo
|
54
|
|||
OPCo
|
1,065
|
|||
PSO
|
262
|
|||
SWEPCo
|
315
|
|||
TCC
|
286
|
|||
TNC
|
72
|
·
|
Requirements
under the CAA to reduce emissions of SO2,
NOx,
particulate matter (PM), and mercury from fossil fuel-fired power
plants;
|
·
|
Requirements
under the Clean Water Act (CWA) to reduce the impacts of water intake
structures on aquatic species at certain power plants;
and
|
·
|
Possible
future requirements to reduce carbon dioxide (CO2)
emissions to address concerns about global climate
change.
|
·
|
In
Kentucky, KPCo settled a rate case, which provided for the recovery
of its
share of the transmission revenue shortfall starting March 30,
2006.
|
·
|
In
Ohio, recovery of CSPCo’s and OPCo’s share of lost T&O/SECA
transmission revenues began retroactive to April 1, 2006 under a
May 2006
PUCO order.
|
·
|
In
West Virginia, APCo settled a rate case, which provided for the recovery
of its share of the T&O/SECA transmission revenue reductions beginning
July 28, 2006.
|
·
|
In
Virginia, APCo filed a request for revised rates, which includes
recovery
of its share of the T&O/SECA transmission revenue reductions starting
October 2, 2006, subject to refund.
|
·
|
In
Indiana, I&M is precluded by a rate cap from requesting an increase to
its rates until July 1, 2007.
|
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
|
|||||||||
04/01/06
- 04/30/06
|
87
|
(a)
|
$
|
75.48
|
-
|
$
|
-
|
||||||
05/01/06
- 05/31/06
|
182
|
(b)(c)
|
79.12
|
-
|
-
|
||||||||
06/01/06
- 06/30/06
|
13
|
(d)
|
89.00
|
-
|
-
|
(a)
|
OPCo
repurchased 87 shares of its 4.50% cumulative preferred stock, in
privately-negotiated transactions outside of an announced
program.
|
(b)
|
APCo
repurchased 172 shares of its 4.50% cumulative preferred stock, in
privately-negotiated transactions outside of an announced
program.
|
(c)
|
TCC
repurchased 10 shares of its 4.00% cumulative preferred stock, in
a
privately-negotiated transaction outside of an announced
program.
|
(d)
|
SWEPCo
repurchased 13 shares of its 5.00% cumulative preferred stock, in
a
privately-negotiated transaction 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:
|
No.
of Shares Voted For
|
|
|
No.
of Shares Abstaining
|
||||
E.
R. Brooks
|
326,978,463
|
16,644,553
|
|||||
Donald
M. Carlton
|
337,696,430
|
5,926,586
|
|||||
Ralph
D. Crosby, Jr.
|
338,248,329
|
5,374,687
|
|||||
John
P. DesBarres
|
338,149,560
|
5,473,456
|
|||||
Robert
W. Fri
|
334,047,720
|
9,575,296
|
|||||
Linda
A Goodspeed
|
336,739,164
|
6,883,852
|
|||||
William
R. Howell
|
337,392,774
|
6,230,242
|
|||||
Lester
A. Hudson, Jr.
|
332,505,104
|
11,117,912
|
|||||
Michael
G. Morris
|
334,335,800
|
9,287,216
|
|||||
Lionel
L. Nowell, III
|
336,703,400
|
6,919,616
|
|||||
Richard
L. Sandor
|
334,137,756
|
9,485,260
|
|||||
Donald
G. Smith
|
334,080,282
|
9,542,734
|
|||||
Kathryn
D. Sullivan
|
337,753,755
|
5,869,261
|
2. |
Ratification
of the appointment of the firm of Deloitte & Touche LLP as the
independent registered public accounting firm for 2006. The proposal
was
approved by a vote of the shareholders as
follows:
|
Votes
FOR
|
314,948,910
|
||
Votes
AGAINST
|
25,137,761
|
||
Votes
ABSTAINED
|
3,536,345
|
Carl
L. English
|
Robert
P. Powers
|
||
John
B. Keane
|
Stephen
P. Smith
|
||
Holly
K. Koeppel
|
Susan
Tomasky
|
||
Venita
McCellon-Allen
|
Dennis
E. Welch
|
||
Michael
G. Morris
|
Carl
L. English
|
Robert
P. Powers
|
||
Thomas
M. Hagan
|
Stephen
P. Smith
|
||
John
B. Keane
|
Susan
Tomasky
|
||
Venita
McCellon-Allen
|
Dennis
E. Welch
|
||
Michael
G. Morris
|
Karl
G. Boyd
|
Venita
McCellon-Allen
|
||
Carl
L. English
|
Susanne
M. Moorman Rowe
|
||
Allen
R. Glassburn
|
Michael
G. Morris
|
||
JoAnn
M. Grevenow
|
Robert
P. Powers
|
||
Patrick
C. Hale
|
Marsha
P. Ryan
|
||
Holly
K. Koeppel
|
Susan
Tomasky
|
||
Marc
E. Lewis
|
Carl
L. English
|
Robert
P. Powers
|
||
John
B. Keane
|
Stephen
P. Smith
|
||
Holly
K. Koeppel
|
Susan
Tomasky
|
||
Venita
McCellon-Allen
|
Dennis
E. Welch
|
||
Michael
G. Morris
|
Carl
L. English
|
Robert
P. Powers
|
||
Thomas
M. Hagan
|
Stephen
P. Smith
|
||
John
B. Keane
|
Susan
Tomasky
|
||
Venita
McCellon-Allen
|
Dennis
E. Welch
|
||
Michael
G. Morris
|