AEP Texas Inc.

Earnings Attributable to SWEPCo Common Shareholder

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

•Retail Revenues increased $264 million primarily due to the following:

•A $148 million increase due to a revenue refund provision recorded in 2024 associated with the Turk Plant and SWEPCo’s 2012 Texas Base Rate Case.

•A $106 million increase in rider revenues.

•Transmission Revenues increased $50 million primarily due to the following:

•A $35 million increase due to continued transmission investment.

•A $27 million increase due to the June 2025 FERC order related to the treatment of NOLCs in transmission formula rates.

•A $12 million decrease due to a provision for refund related to probable over-recovery of FERC transmission formula rates.

•Purchased Electricity, Fuel and Other Consumables Used for Electric Generation expenses decreased $6 million primarily due to a current year decrease in amortization of under-recovered deferred fuel regulatory assets.

•Other Operation and Maintenance expenses increased $80 million primarily due to the following:

•A $51 million increase in transmission expenses primarily due to:

•A $29 million increase due to continued transmission investment.

•A $10 million increase related to the June 2025 FERC NOLC order.

•An $8 million increase in vegetation management expenses.

•A $32 million increase in distribution expenses primarily due to an increase in vegetation management and storm-related costs.

•A $14 million increase in employee-related expenses.

•A $12 million increase in renewable generation operation and maintenance expenses.

•A $17 million decrease due to the voluntary severance program that occurred in the second quarter of 2024.

•A $14 million decrease due to a disallowance recorded on the remaining net book value of the Dolet Hills Power Station as a result of an LPSC approved settlement agreement in April 2024.

•Asset Impairments and Other Related Charges increased $6 million due to an impairment of in-process internal use software development costs.

•Depreciation and Amortization expenses increased $40 million primarily due to the following:

•A $31 million increase due to a higher depreciable base.

•A $20 million increase due to the amortization of the Storm Recovery Funding securitized assets.

•A $6 million increase due to the amortization of an NOLC regulatory asset recognized in 2025.

•An $18 million decrease due to the under-recovery of regulatory assets related to renewables.

•Allowance for Equity Funds Used During Construction increased $9 million primarily due to increased AFUDC base and rates.

•Non-Service Cost Components of Net Periodic Benefit Cost decreased $6 million primarily due to a plan remeasurement triggered by settlements related to the voluntary severance program in 2024.

•Interest Expense increased $51 million primarily due to the following:

•A $28 million increase associated with Storm Recovery Funding securitization bonds.

•A $28 million increase due to a prior year deferral of expenses in Texas as a result of the IRS PLR received regarding the treatment of stand-alone NOLCs in retail ratemaking.

•Income Tax Benefit decreased $89 million primarily due to the following:

•A $109 million decrease due to a reduction in Excess ADIT regulatory liabilities as a result of the IRS PLR received regarding the treatment of stand-alone NOLCs in retail ratemaking recorded in 2024.

•A $32 million decrease due to the reversal of a regulatory liability related to the merchant portion of Turk Plant Excess ADIT as a result of the APSC’s denial of SWEPCo’s request to allow the merchant portion of the Turk Plant to serve Arkansas customers recorded in 2024.

•A $32 million decrease due to an increase in pretax book income.

•A $42 million increase due to a reduction in Excess ADIT primarily due to the June 2025 FERC order related to the treatment of NOLCs in transmission formula rates.

•A $27 million increase due to an increase in PTCs.

•A $14 million increase due to a decrease in state taxes.

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, 2025 and 2024, 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, 2025, 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, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025 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 audits 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. Regulatory assets (deferred expenses to be recovered in the future) 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. As of December 31, 2025, there were $1,018 million of deferred costs included in regulatory assets, $445 million of which were pending final regulatory approval, and $576 million of regulatory liabilities awaiting potential refund or future rate reduction, $7 million of which were pending final regulatory determination. 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 (i) the significant judgment by management in assessing probability of the recovery of regulatory assets and refund of regulatory liabilities and (ii) 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 controls over the probability of recovery of regulatory assets and refund of regulatory liabilities. These procedures also included, among others (i) evaluating the reasonableness of management's assessment of probability of future recovery for regulatory assets and refund of regulatory liabilities; (ii) testing, on a sample basis, the regulatory assets and liabilities, including those subject to pending rate cases and regulatory proceedings, by considering (a) the provisions and formulas outlined in rate orders; (b) other regulatory correspondence; and (c) application of relevant regulatory precedents.

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, 2025. 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, 2025.

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.