The accounting guidance for “Variable Interest Entities” is a consolidation model that considers if a company has a variable interest in a VIE. A VIE is a legal entity that possesses any of the following conditions: the entity’s equity at risk is not sufficient to permit the legal entity to finance its activities without additional subordinated financial support, equity owners are unable to direct the activities that most significantly impact the legal entity’s economic performance (or they possess disproportionate voting rights in relation to the economic interest in the legal entity), or the equity owners lack the obligation to absorb the legal entity’s expected losses or the right to receive the legal entity’s expected residual returns. Entities are required to consolidate a VIE when it is determined that they have a controlling financial interest in a VIE and therefore, are the primary beneficiary of that VIE, as defined by the accounting guidance for “Variable Interest Entities.” In determining whether AEP is the primary beneficiary of a VIE, management considers whether AEP has the power to direct the most significant activities of the VIE and is obligated to absorb losses or receive the expected residual returns that are significant to the VIE. Management believes that significant assumptions and judgments were applied consistently.

AEP holds ownership interests in businesses with varying ownership structures. Partnership interests and other variable interests are evaluated to determine if each entity is a VIE, and if so, whether or not the VIE should be consolidated into AEP’s financial statements. AEP has not provided material financial or other support that was not previously contractually required to any of its consolidated VIEs. AEP’s interests in non-consolidated VIEs are accounted for under the equity method of accounting.

In May 2026, Appalachian Recovery Funding was formed for the sole purpose of issuing and servicing securitization bonds primarily related to certain Virginia jurisdictional Property, Plant and Equipment balances for the Amos and Mountaineer Plants and certain Virginia jurisdictional major storm costs deferred to Regulatory Assets. Management concluded that APCo holds a variable interest in Appalachian Recovery Funding and is the primary beneficiary of the VIE because APCo has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. Therefore, APCo is required to consolidate Appalachian Recovery Funding. As of June 30, 2026, $35 million of the securitized bonds was included in Long-term Debt Due Within One Year - Nonaffiliated and $1.3 billion was included in Long-term Debt - Nonaffiliated on the balance sheets. Appalachian Recovery Funding’s securitized asset was $1.4 billion as of June 30, 2026 which is presented in Securitized Assets on the face of the balance sheets.

The securitized asset represents the right to impose and collect Virginia jurisdictional recovery charges from APCo’s Virginia jurisdictional customers. The securitization bonds are payable only from and secured by the securitized asset. The bondholders have no recourse to APCo or any other AEP entity. APCo acts as the servicer for Appalachian Recovery Funding’s securitized asset and remits all related amounts collected from customers to Appalachian Recovery Funding for interest and principal payments on the securitization bonds and related costs. See the tables below for the classification of Appalachian Recovery Funding’s assets and liabilities on APCo’s balance sheets.




	June 30, 2026

	Consolidated VIEs
	SWEPCo Sabine		I&M DCC Fuel		AEP Texas Restoration Funding			APCo Appalachian Consumer Rate Relief Funding			APCo Appalachian Recovery Funding		SWEPCo Storm Recovery Funding		KPCo Cost Recovery Funding			AEP Credit		Protected Cell of EIS		Transource Energy
	(in millions)
ASSETS
Current Assets	$	1	$	91	$	19		$	19		$	21	$	16	$	20		$	1,353	$	240	$	50
Net Property, Plant and Equipment	—		163		—			—			—		—		—			—		—		691
Other Noncurrent Assets	72		82		87		(a)	64		(b)	1,361		309		455		(c)	12		—		7
Total Assets	$	73	$	336	$	106		$	83		$	1,382	$	325	$	475		$	1,365	$	240	$	748

LIABILITIES AND EQUITY
Current Liabilities	$	14	$	91	$	32		$	31		$	42	$	23	$	23		$	1,293	$	53	$	45
Noncurrent Liabilities	59		245		73			50			1,333		300		450			—		136		321
Equity	—		—		1			2			7		2		2			72		51		382
Total Liabilities and Equity	$	73	$	336	$	106		$	83		$	1,382	$	325	$	475		$	1,365	$	240	$	748




	December 31, 2025

	Consolidated VIEs
	SWEPCo Sabine		I&M DCC Fuel		AEP Texas Restoration Funding			APCo Appalachian Consumer Rate Relief Funding			SWEPCo Storm Recovery Funding		KPCo Cost Recovery Funding			AEP Credit		Protected Cell of EIS		Transource Energy
	(in millions)
ASSETS
Current Assets	$	1	$	118	$	18		$	18		$	17	$	24		$	1,232	$	223	$	45
Net Property, Plant and Equipment	—		227		—			—			—		—			—		—		658
Other Noncurrent Assets	80		118		98		(a)	79		(b)	312		462		(c)	10		—		4
Total Assets	$	81	$	463	$	116		$	97		$	329	$	486		$	1,242	$	223	$	707

LIABILITIES AND EQUITY
Current Liabilities	$	15	$	118	$	31		$	31		$	23	$	30		$	1,176	$	56	$	50
Noncurrent Liabilities	66		345		84			64			304		454			1		102		298
Equity	—		—		1			2			2		2			65		65		359
Total Liabilities and Equity	$	81	$	463	$	116		$	97		$	329	$	486		$	1,242	$	223	$	707

In November 2025 and December 2025, OPCo filed applications with the PUCO and FERC, respectively, to transfer its 4.3% ownership in OVEC to Parent and its 19.93% OVEC power participation entitlement to AGR. In December 2025 and April 2026, the PUCO approved the application and the FERC authorized the transaction, respectively. The transaction was completed in June 2026. As a result of the transaction, Parent remains responsible for the financial and other obligations of AGR under the intercompany power agreement.

In August 2025, AEP and Gigawatt AI, Inc. (GWAI), a privately held company, entered into a new commercial arrangement. GWAI is focused on developing AI-centric operating systems and applications that optimize utility operations and infrastructure. AEP initially invested $100 million for a 10% ownership interest in the common stock and received a warrant for the option to acquire an additional 5% of GWAI’s common stock for $50 million. In January and April 2026, AEP made two additional $25 million investments, each for an incremental 2.5% interest in GWAI’s common stock because of GWAI’s achievement of performance-based milestones. As a result, as of June 30, 2026, AEP holds 15% of GWAI’s common stock with a cumulative investment of $150 million. In July 2026, AEP confirmed GWAI’s achievement of two additional performance-based milestones. Pursuant to the agreements, the parties are progressing with the established procedural requirements for closing the investment, which is expected in the third quarter of 2026.

In connection with AEP’s equity interest, AEP was granted the right to designate one of the three members of GWAI’s board of directors. The board position is currently held by an officer of AEP and, therefore, the investment is a related-party transaction. AEP’s board participation provides AEP with direct influence over GWAI’s governance and oversight, while GWAI’s founders retain all other equity interests and board representation. AEP also acquired a perpetual software license for software developed by GWAI.

The equity interest is accounted for as an equity method investment due to AEP’s ability to exercise significant influence over certain GWAI policies. As of June 30, 2026, AEP’s carrying value of the investment in GWAI was $150 million, which is recognized in Deferred Charges and Other Noncurrent Assets on the balance sheet. AEP’s proportionate share of GWAI’s losses was immaterial for the three and six months ended June 30, 2026.

The common stock warrant meets the definition of a derivative instrument and is therefore required to be carried at fair value on a recurring basis. The fair value of the common stock warrant and AEP’s acquired perpetual software license were immaterial as of June 30, 2026.