AMERICAN ELECTRIC POWER CO INC

Earnings Attributable to SWEPCo Common Shareholder

(a)Includes firm wholesale sales to municipals and cooperatives.

•Retail Revenues decreased $86 million primarily due to the following:

•A $125 million decrease in fuel revenue primarily due to lower natural gas and spot market energy prices, partially offset by authorized fuel rate increases in Arkansas and Texas designed to recover previously under-recovered fuel regulatory asset balances.

•A $20 million decrease in weather-related usage due to a 37% decrease in heating degree days.

•An $11 million decrease in weather-normalized margins primarily in the residential class.

•A $70 million increase primarily due to base rate revenue increases in Louisiana and Arkansas and rider increases in all retail jurisdictions.

•Off-system Sales decreased $14 million primarily due to reduced Turk Plant merchant sales.

•Transmission Revenues decreased $7 million primarily due to the following:

•A $13 million decrease due to a FERC order which denied stand-alone treatment of NOLCs in transmission formula rates.

•An $8 million decrease in transmission formula rate true-up activity.

•A $12 million increase in transmission investment.

•Purchased Electricity, Fuel and Other Consumables Used for Electric Generation expenses decreased $82 million primarily due to lower natural gas and spot market energy prices, partially offset by the current year amortization of under-recovered fuel regulatory assets due to authorized fuel rate increases in Arkansas and Texas.

•Other Operation and Maintenance expenses decreased $53 million primarily due to the following:

•A $19 million decrease in transmission expenses primarily due to the following:

•A $13 million decrease in transmission formula rate true-up activity and decreased third-party expenses.

•A $7 million decrease due to a FERC order which denied stand-alone treatment of NOLCs in transmission formula rates.

•An $11 million decrease due to pre-construction costs associated with various renewable projects.

•A $10 million decrease in administrative and general expenses primarily due to regulatory fees and employee-related expenses.

•A $9 million decrease due to a prior year charitable contribution to the AEP Foundation.

•Asset Impairments and Other Related Charges increased $86 million due to the probable disallowance of Turk Plant capitalized AFUDC in excess of the Texas jurisdictional capital cost cap as a result of the PUCT’s December 2023 preliminary order in the 2012 Texas Base Rate Case.

•Depreciation and Amortization expenses increased $18 million primarily due to an increase in amortization of regulatory assets.

•Taxes Other Than Income Taxes increased $8 million primarily due to increased property taxes driven by the investment in the NCWF.

•Allowance for Equity Funds Used During Construction increased $7 million primarily due to higher AFUDC equity rates and CWIP.

•Interest Expense increased $10 million primarily due to higher long-term debt balances and interest rates.

•Income Tax Benefit increased $8 million primarily due to the following:

•A $17 million increase due to a decrease in pretax book income.

•A $10 million increase in PTCs.

•A $12 million decrease due to the probable disallowance of Turk Plant capitalized AFUDC in excess of the Texas jurisdictional capital cost cap.

•A $3 million decrease in depletion benefit.

•A $2 million decrease due to a decrease in amortization of Excess ADIT.

Southwestern Electric Power Company

We have audited the accompanying consolidated balance sheets of Southwestern Electric Power Company and its subsidiaries (the “Company”) as of December 31, 2023 and 2022 and the related consolidated statements of income, of comprehensive income (loss), of changes in equity and of cash flows for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

As described in Notes 1 and 5 to the consolidated financial statements, the Company's consolidated financial statements reflect the actions of regulators that result in the recognition of certain revenues and expenses in different time periods than enterprises that are not rate-regulated. As of December 31, 2023, there were $1,303 million of deferred costs included in regulatory assets, $408 million of which were pending final regulatory approval, and $759 million of regulatory liabilities awaiting potential refund or future rate reduction, $7 million of which were pending final regulatory determination. Regulatory assets (deferred expenses) and regulatory liabilities (deferred future revenue reductions or refunds) are recorded to reflect the economic effects of regulation in the same accounting period by matching expenses with their recovery through regulated revenues and matching income with its passage to customers in cost-based regulated rates. Management reviews the probability of recovery of regulatory assets and refund of regulatory liabilities at each balance sheet date and whenever new events occur, such as changes in the regulatory environment, issuance of regulatory commission orders, or passage of new legislation.

The principal considerations for our determination that performing procedures relating to the accounting for the effects of cost-based regulation is a critical audit matter are the significant judgment by management in the ongoing evaluation of the recovery of regulatory assets and refund of regulatory liabilities, and in applying guidance contained in rate orders and other relevant evidence; this in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to the probability of recovery of regulatory assets and refund of regulatory liabilities.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management's evaluation of new events, such as changes in the regulatory environment, issuance of regulatory commission orders, or passage of new legislation, including the probability of recovery of regulatory assets and refund of regulatory liabilities. These procedures also included, among others, evaluating the reasonableness of management's assessment of probability of future recovery for regulatory assets and refund of regulatory liabilities. Testing of regulatory assets and liabilities involved evaluating the provisions and formulas outlined in rate orders, other regulatory correspondence, application of relevant regulatory precedents, and other relevant evidence.

The management of Southwestern Electric Power Company Consolidated (SWEPCo) is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. SWEPCo’s internal control is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of SWEPCo’s internal control over financial reporting as of December 31, 2023. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework (2013). Based on management’s assessment, management concluded SWEPCo’s internal control over financial reporting was effective as of December 31, 2023.

This annual report does not include an audit report from PricewaterhouseCoopers LLP, SWEPCo’s registered public accounting firm regarding internal control over financial reporting pursuant to the Securities and Exchange Commission rules that permit SWEPCo to provide only management’s report in this annual report.