American Electric Power Company AEP · USD

BUSINESS SEGMENTS The disclosures in this note apply to all Registrants unless indicated otherwise.AEP’s Reportable SegmentsAEP’s primary business is the generation, transmission and distribution of electricity. Within its Vertically Integrated Utilities segment, AEP centrally dispatches generation assets and manages its overall utility operations on an integrated basis because of the substantial impact of cost-based rates and regulatory oversight applicable to each public utility subsidiary. Intersegment sales and transfers are generally based on underlying contractual arrangements and agreements.The CODM of AEP is the President and CEO of AEP, who makes operating decisions, allocates resources to and assesses performance based on these reportable segments. The CODM uses earnings (loss) attributable to AEP common shareholders (presented on a GAAP basis) as a measure of segment profit or loss in making these decisions. Earnings (loss) attributable to AEP common shareholders includes intercompany revenues and expenses that are eliminated on the consolidated financial statements.AEP’s reportable segments and their related business activities are outlined below:Vertically Integrated Utilities•Generation, transmission and distribution of electricity for sale to retail and wholesale customers through assets owned and operated by AEGCo, APCo, I&M, KGPCo, KPCo, PSO, SWEPCo and WPCo.Transmission and Distribution Utilities•Transmission and distribution of electricity for sale to retail and wholesale customers through assets owned and operated by AEP Texas and OPCo. •OPCo purchases energy and capacity to serve standard service offer customers and provides transmission and distribution services for all connected load.AEP Transmission Holdco•Development, construction and operation of transmission facilities through investments in AEPTCo. These investments have FERC-approved ROEs. •Development, construction and operation of transmission facilities through investments in AEP’s transmission-only joint ventures. These investments have PUCT-approved or FERC-approved ROEs.Generation & Marketing•Marketing, risk management and retail activities in ERCOT, MISO, PJM and SPP.•Competitive generation in PJM.The remainder of AEP’s activities are presented as Corporate and Other.

REVENUE FROM CONTRACTS WITH CUSTOMERSThe disclosures in this note apply to all Registrants, unless indicated otherwise.Disaggregated Revenues from Contracts with CustomersThe tables below represent AEP’s reportable segment revenues from contracts with customers, net of respective provisions for refund, by type of revenue:Year Ended December 31, 2025VIUT&DAEPTHCoG&MCorporate and OtherReconciling AdjustmentsAEP Consolidated(in millions)Retail Revenues:Residential Revenues$4,969 $2,785 $— $— $— $— $7,754 Commercial Revenues3,068 1,626 — — — — 4,694 Industrial Revenues (a)2,718 533 — — — (1)3,250 Other Retail Revenues242 60 — — — — 302 Total Retail Revenues10,997 5,004 — — — (1)16,000 Wholesale and Competitive Retail Revenues:Generation Revenues 1,033 — — 187 — — 1,220 Transmission Revenues (b)533 812 2,275 — — (2,017)1,603 Retail, Trading and Marketing Revenues (c)— — — 2,463 — (66)2,397 Total Wholesale and Competitive Retail Revenues1,566 812 2,275 2,650 — (2,083)5,220 Other Revenues from Contracts with Customers (d)236 259 36 10 137 (196)482 Total Revenues from Contracts with Customers12,799 6,075 2,311 2,660 137 (2,280)21,702 Other Revenues:Alternative Revenue Programs (e)29 51 66 — — (85)61 Other Revenues (f)(9)21 — 102 7 (8)113 Total Other Revenues20 72 66 102 7 (93)174 Total Revenues$12,819 $6,147 $2,377 $2,762 $144 $(2,373)$21,876 (a)Amounts include affiliated and nonaffiliated revenues. (b)Amounts include affiliated and nonaffiliated revenues. The affiliated revenues for AEP Transmission Holdco were $1.8 billion. The affiliated revenues for Vertically Integrated Utilities were $211 million. The remaining affiliated amounts were immaterial.(c)Amounts include affiliated and nonaffiliated revenues. The affiliated revenues for Generation & Marketing were $66 million. The remaining affiliated amounts were immaterial.(d)Amounts include affiliated and nonaffiliated revenues. The affiliated revenues for Corporate and Other were $113 million. The remaining affiliated amounts were immaterial.(e)Alternative revenue programs in certain jurisdictions include regulatory mechanisms that periodically adjust for over/under collection of related revenues. Amounts include affiliated and nonaffiliated revenues. The affiliated revenues for AEP Transmission Holdco were $57 million. The remaining affiliated amounts were immaterial.(f)Generation & Marketing includes economic hedge activity.

COMMITMENTS, GUARANTEES AND CONTINGENCIESThe disclosures in this note apply to all Registrants unless indicated otherwise.The Registrants are subject to certain claims and legal actions arising in the ordinary course of business. In addition, the Registrants’ business activities are subject to extensive governmental regulation related to public health and the environment. The ultimate outcome of such pending or potential litigation against the Registrants cannot be predicted. Management accrues contingent liabilities only when management concludes that it is both probable that a liability has been incurred at the date of the financial statements and the amount of loss can be reasonably estimated. When management determines that it is not probable, but rather reasonably possible that a liability has been incurred at the date of the financial statements, management discloses such contingencies and the possible loss or range of loss if such estimate can be made. Any estimated range is based on currently available information and involves elements of judgment and significant uncertainties. Any estimated range of possible loss may not represent the maximum possible loss exposure. Circumstances change over time and actual results may vary significantly from estimates.For current proceedings not specifically discussed below, management does not anticipate that the liabilities, if any, arising from such proceedings would have a material effect on the financial statements.COMMITMENTS (Applies to all Registrants except AEP Texas and AEPTCo)AEP subsidiaries have substantial commitments for fuel, energy and capacity contracts as part of the normal course of business. Certain contracts contain penalty provisions for early termination.

INCOME TAXESThe disclosures in this note apply to all Registrants unless indicated otherwise.Income Tax Expense (Benefit)The details of the Registrants’ Income Tax Expense (Benefit) as reported are as follows:Year Ended December 31, 2025AEPAEP TexasAEPTCoAPCoI&MOPCoPSOSWEPCo(in millions)Federal:Current$(209)$27 $148 $42 $(3)$27 $(221)$(180)Deferred298 70 (173)43 (14)42 149 89 Total Federal89 97 (25)85 (17)69 (72)(91)State and Local:Current28 4 18 2 19 (2)— 3 Deferred12 — 22 (1)(1)5 2 (7)Total State and Local40 4 40 1 18 3 2 (4)Income Tax Expense (Benefit)$129 $101 $15 $86 $1 $72 $(70)$(95) Year Ended December 31, 2024AEPAEP TexasAEPTCoAPCoI&MOPCoPSOSWEPCo(in millions)Federal:Current$(3)$22 $75 $80 $17 $42 $(119)$(112)Deferred(58)77 89 (18)(119)(3)20 (86)Total Federal(61)99 164 62 (102)39 (99)(198)State and Local:Current(5)3 6 13 7 3 — 2 Deferred27 — 20 — — 10 (1)12 Total State and Local22 3 26 13 7 13 (1)14 Income Tax Expense (Benefit)$(39)$102 $190 $75 $(95)$52 $(100)$(184)Year Ended December 31, 2023AEPAEP TexasAEPTCoAPCoI&MOPCoPSOSWEPCo(in millions)Federal:Current$(117)$20 $94 $62 $94 $46 $(61)$(88)Deferred116 63 52 (60)(57)3 3 60 Total Federal(1)83 146 2 37 49 (58)(28)State and Local:Current69 3 9 6 21 — — 1 Deferred(13)— (8)6 1 5 4 (6)Total State and Local56 3 1 12 22 5 4 (5)Income Tax Expense (Benefit)$55 $86 $147 $14 $59 $54 $(54)$(33) The following are reconciliations for the Registrants between the federal income taxes computed by multiplying pretax income by the federal statutory tax rate and the income taxes reported:Year Ended December 31,AEP202520242023(dollars in millions)Net Income$3,696 $2,976 $2,213 Income Tax Expense (Benefit)129 (39)55 Pretax Income$3,825 $2,937 $2,268 AmountPercentAmountPercentAmountPercentU.S. Federal Statutory Tax Rate$803 21.0 %$617 21.0 %$476 21.0 %State and Local Income Taxes, Net (a)31 0.8 %17 0.6 %44 1.9 %Tax Credits:Production Tax Credits(244)(6.4)%(214)(7.3)%(175)(7.7)%Investment Tax Credits(3)(0.1)%(58)(2.0)%(50)(2.2)%Other Credits(4)(0.1)%(9)(0.3)%(1)— %Non-Taxable or Non-Deductible Items— — %(3)(0.1)%1 — %Changes in Unrecognized Tax Benefits3 0.1 %7 0.2 %(5)(0.2)%Other Adjustments:Reversal of Origination Flow-Through18 0.5 %22 0.7 %24 1.1 %Tax Reform Excess ADIT Reversal(62)(1.6)%(92)(3.1)%(151)(6.7)%Remeasurement of Excess ADIT(383)(10.0)%(262)(8.9)%(46)(2.0)%AFUDC Equity(41)(1.1)%(42)(1.4)%(38)(1.7)%Other11 0.3 %(22)(0.7)%(24)(1.1)%Income Tax Expense (Benefit)$129 $(39)$55 Effective Income Tax Rate3.4 %(1.

STOCK-BASED COMPENSATIONThe disclosures in this note apply to AEP only. The impact of AEP’s share-based compensation plans is insignificant to the financial statements of the Registrant Subsidiaries. AEP’s long-term incentive plan available for eligible employees and directors, the American Electric Power System 2015 Long-Term Incentive Plan (2015 LTIP), was replaced prospectively for new grants by the American Electric Power System 2024 Long-Term Incentive Plan (2024 LTIP) effective in April 2024. The 2024 LTIP provides for a maximum of 10 million AEP common shares to be available for grant to eligible employees and directors. As of December 31, 2025, 8,909,934 shares remained available for issuance under the 2024 LTIP. No new awards may be granted under the 2015 LTIP. To the extent the issuance of a share is subject to an outstanding award under the 2015 LTIP, the issuance of that share will take place under the 2015 LTIP. Awards granted under the 2024 LTIP may be made in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards and other stock-based awards. All types of shares issued under the 2024 LTIP including stock options, stock appreciation rights, restricted stock units and performance shares reduce the shares remaining available for grants at a rate of 1 to 1. Cash settled awards do not reduce the number of shares remaining available under the 2024 LTIP. The following sections provide further information regarding each type of stock-based compensation award granted under these plans.Performance SharesPerformance shares are settled in AEP common stock and reduce the aggregate share authorization. The number of performance shares held at the end of the three-year performance period is multiplied by the performance score for such period to determine the actual number of performance shares that participants realize. The performance score can range from 0% to 200% and is determined at the end of the performance period based on performance measures, which include both performance and market conditions, established for each grant at the beginning of the performance period by the Human Resources Committee of AEP’s Board of Directors (HR Committee).Certain employees must satisfy a minimum stock ownership requirement.

LEASES The disclosures in this note apply to all Registrants unless indicated otherwise. The Registrants lease property, plant and equipment including, but not limited to, fleet, information technology and real estate leases. These leases require payments of non-lease components, including related property taxes, operating and maintenance costs. AEP does not separate non-lease components from associated lease components. Many of these leases have purchase or renewal options. Leases not renewed are often replaced by other leases. Options to renew or purchase a lease are included in the measurement of lease assets and liabilities if it is reasonably certain the Registrant will exercise the option. Lease obligations are measured using the discount rate implicit in the lease when that rate is readily determinable. AEP has visibility into the rate implicit in the lease when assets are leased from selected financial institutions under master leasing agreements. When the implicit rate is not readily determinable, the Registrants measure their lease obligation using their estimated secured incremental borrowing rate. Incremental borrowing rates are comprised of an underlying risk-free rate and a secured credit spread relative to the lessee on a matched maturity basis.Operating lease rentals and finance lease amortization costs are generally charged to Other Operation and Maintenance expense in accordance with ratemaking treatment for regulated operations. Interest on finance lease liabilities is generally charged to Interest Expense. Lease costs associated with capital projects are included in Property, Plant and Equipment on the balance sheets. For regulated operations with finance leases, a finance lease asset and offsetting liability are recorded at the present value of the remaining lease payments for each reporting period. Finance leases for nonregulated property are accounted for as if the assets were owned and financed.

ACQUISITIONS, DISPOSITIONS AND IMPAIRMENTSThe disclosures in this note apply to AEP unless indicated otherwise.ACQUISITIONSWagon Wheel Wind Facility (Applies to AEP and SWEPCo)In December 2025, SWEPCo acquired 100% of the equity interests in Wagon Wheel Project, LLC, the owner of the newly constructed Wagon Wheel wind facility located across multiple counties in Oklahoma. This facility, placed in service in December 2025, serves both retail and wholesale customers in Arkansas and Louisiana. SWEPCo’s Louisiana jurisdictional share of the Wagon Wheel revenue requirement, net of PTC benefit, is recoverable through an authorized rider until the amounts are reflected in base rates. Recovery of the Arkansas portion of the Wagon Wheel revenue requirement began in February 2026 through base rates. Regulatory commission approval of the inclusion of the output from Wagon Wheel in retail rates resulted in various capital cost, performance and other guarantees for retail customers which could subject SWEPCo to future regulatory liabilities to retail customers.The acquisition of Wagon Wheel resulted in the recognition of operating leases for easement and access rights to the land on which the facilities are located, as well as the associated ARO. In accordance with the guidance for “Business Combinations,” management determined that the acquisition represents an asset acquisition. The table below summarizes the impact at acquisition on SWEPCo’s balance sheets:Plant NameStateFuel TypeNet Maximum Capacity(MWs)Property, Plant and Equipment, NetOperating Lease AssetsAsset Retirement Obligations(in millions)Wagon WheelOKWind598$1,272 $66 $20 Top Hat Wind Facility (Applies to AEP and APCo)In November 2025, APCo acquired 100% of the equity interests in Top Hat Wind Energy, LLC, the owner of the newly constructed Top Hat wind facility located in Logan County, Illinois. This facility, placed in service in November 2025, serves both retail and wholesale customers in Virginia and West Virginia. Virginia and West Virginia jurisdictional shares of the Top Hat revenue requirement, net of PTC benefit, is recoverable through existing riders until the amounts are reflected in base rates. The acquisition of Top Hat resulted in the recognition of operating leases for easement and access rights to the land on which the facilities are located, as well as the associated ARO.

Cybersecurity is a critical component of AEP’s risk management framework. As an electric utility operating critical infrastructure, AEP is subject to mandatory requirements under applicable federal, state, and industry standards. AEP maintains a risk-based cybersecurity program designed to protect the confidentiality, integrity, and availability of its information technology, operational technology, and critical infrastructure assets. Cybersecurity Risk Management and Strategy AEP’s cybersecurity risk management program is designed to identify, assess, and manage risks from cybersecurity threats, including those posed by third parties. The program incorporates a defense-in-depth approach, leverages partnerships with government and peers to assess the evolving threats and aligns with recognized industry standards and regulatory requirements applicable to electric utilities. Key elements of AEP’s cybersecurity program include, among others: •Continuous monitoring and detection of cyber threats; •Vulnerability assessments and penetration testing; •Incident response planning and exercises; •Business continuity and disaster recovery planning; •Security awareness training, including advanced phishing simulations; •Third-party risk management, including vendor due diligence and contractual controls; •Cybersecurity insurance coverage. AEP regularly evaluates and updates its cybersecurity controls, processes, and technologies in response to the evolving threat landscape and regulatory developments. We leverage both internal expertise and external partners to assist with assessments, testing, and program maturity evaluations.