American Electric Power streamlines Texas generation as capex rises
The holding company completed its exit from the Texas generation business while expanding capital liabilities across its Ohio and Texas subsidiaries.
American Electric Power (AEP) managed a structural shift in its generation footprint and a rise in short-term construction liabilities across its multi-state system in 2024. The company operates a broad network of subsidiaries spanning Virginia, West Virginia, Tennessee, Indiana, Michigan, Kentucky, Ohio, Oklahoma, Arkansas, Louisiana, and Texas.
Regulatory recovery for the group relies heavily on FERC-regulated formula rate mechanisms for wholesale power supply contracts, which the company trues-up to actual costs annually. In Oklahoma, Public Service Company of Oklahoma (OK) maintained extensive formula rate filings under docket ER18-195-000 to update SPP OATT Attachment H-4 through 2024.
Capital expenditures saw a notable uptick in accrued liabilities. AEP Texas (TX) construction expenditures included in current and accrued liabilities rose to $266.0 million in 2024, up from $112.2 million in 2023. Ohio Power Company (OH) saw a similar trend, with its construction expenditures in current and accrued liabilities increasing to $157.9 million from $97.7 million in the prior year.
The company continued to refine its generation mix, most notably in Texas. AEP Texas completed the final stage of its exit from the generation business per state restructuring legislation, transferring remaining non-deactivated capacity to an affiliate and ceasing to serve retail load. Meanwhile, AEP Generating Company (IN) solidified its position at the Rockport Plant, where it co-owns Unit 1 with Indiana Michigan Power Company (IN) and holds 100% ownership of Unit 2 following a December 2022 acquisition.
Revenue streams remain concentrated among a few large entities in specific markets. A single industrial customer, Marathon Petroleum Company, accounted for 15% of Kentucky Power Company's (KY) total revenues in 2024. In the Texas market, AEP Texas remains dependent on Retail Electric Providers, with NRG Energy and TXU Energy combining for 42% of its operating revenues.
Operational liquidity is managed through AEP Credit, which performs daily factoring of accounts receivable for multiple subsidiaries to mitigate credit risk. To meet Ohio's renewable portfolio standards, Ohio Power utilized an inventory model to manage its Renewable Energy Credits. In Texas, the company employed securitization for transition and restoration funding through three dedicated wholly-owned subsidiaries.
American Electric Power continues to navigate the transition from traditional generation to a transmission-heavy posture in Texas while managing concentrated industrial revenue risks in the Appalachian region.