American Electric Power (AEP) risk factors, 2026 10-K

What changed since the prior 10-K

New

• New

  The business and capital investment plans of AEP are subject to execution risks. (Applies to all Registrants)

  Construction plans, including projects for data centers and other large-load customers, could face delays, cost overruns, cancellations or unrecoverable costs.

• New

  Regulated electric revenues and earnings are subject to prudency review. (Applies to all Registrants)

  Regulators could disallow storm, operating, capital-project or resource-acquisition costs they find imprudent or inconsistent with tariffs.

• New

  Regulatory bodies may not allow recovery of costs incurred on a timely basis. (Applies to all Registrants)

  Long rate cases and appeals could delay recovery of costs and leave regulated utilities earning below allowed returns.

• New

  AEP is subject to negative publicity. (Applies to all Registrants)

  Criticism over storm restoration, infrastructure operations, service quality, prices or fossil-fuel use could damage AEP’s reputation.

• NewRISKS RELATED TO MARKET, ECONOMIC OR FINANCIAL VOLATILITY AND OTHER RISKS

  AEP has not identified any cybersecurity incidents that have materially affected or are reasonably likely to materially affect its business strategy, results of operation or financial condition

  A physical or cybersecurity breach involving AEP or vendors could cause outages, legal exposure, regulatory action, repairs and unrecoverable losses.

• NewRISKS RELATED TO MARKET, ECONOMIC OR FINANCIAL VOLATILITY AND OTHER RISKS

  Changes in U.S. or foreign trade policies, including the imposition of tariffs and other protectionist trade measures, and other factors beyond AEP’s control may adversely impact future net income and cash flows and financial condition

  Tariffs, sanctions, trade restrictions and retaliatory measures could raise equipment, service and capital costs and worsen supply-chain problems.

• NewRISKS RELATED TO MARKET, ECONOMIC OR FINANCIAL VOLATILITY AND OTHER RISKS

  Difficulties in sustaining leadership continuity could negatively impact AEP’s business and financial condition. The ability to maintain strong leadership relies on effective succession planning, and gaps in preparing or transitioning individuals into critical roles may impact performance

  Weak succession planning or gaps in transitioning leaders into critical roles could impair performance and financial condition.

• NewRISKS RELATED TO MARKET, ECONOMIC OR FINANCIAL VOLATILITY AND OTHER RISKS

  AEP is exposed to changes in the price and availability of purchased power and fuel (including the cost to procure coal and gas) and the price and availability to transport fuel

  Higher or unavailable coal, natural gas, uranium, diesel, purchased power or emissions-allowance costs could make generation uneconomic or force early retirements.

• NewRISKS RELATED TO MARKET, ECONOMIC OR FINANCIAL VOLATILITY AND OTHER RISKS

  While AEP typically recovers such fuel-related expenses pursuant to rate recovery mechanisms in regulated jurisdictions, the failure to recover these costs could reduce future net income and cash flows and possibly harm AEP’s financial condition

  AEP may not recover volatile purchased-power, fuel and emissions costs, while trading mark-to-market differences could reduce earnings and cash flow.

• NewRISKS RELATED TO MARKET, ECONOMIC OR FINANCIAL VOLATILITY AND OTHER RISKS

  mitigation efforts, regulatory recovery risk, litigation risk, and the potential for a credit downgrade and subsequent additional costs to access capital markets

  Electrical, wildfire, explosion, equipment, hazardous-substance or contractor incidents could cause deaths, injuries, property damage, liability and operating disruption.

• NewRISKS RELATED TO MARKET, ECONOMIC OR FINANCIAL VOLATILITY AND OTHER RISKS

  The impact of new laws, regulations and policies and the related interpretations, as well as changes in enforcement practices or

  Changing laws, regulations, interpretations and enforcement could require costly system changes, capital spending and operational changes, or harm products and reputation.

Dropped

• Dropped

  AEP’s transmission investment strategy and execution are dependent on federal and state regulatory policy. (Applies to all Registrants)

  Transmission investment strategy depended on federal and state policies and continuing transmission needs.

• Dropped

  AEP may not recover costs incurred to begin construction on projects that are canceled. (Applies to all Registrants)

• DroppedRISKS RELATED TO MARKET, ECONOMIC OR FINANCIAL VOLATILITY AND OTHER RISKS

  Our financial position may be adversely impacted if announced dispositions do not occur as planned. (Applies to AEP)

  Canceled projects could leave AEP unable to recover construction-startup costs.

• DroppedRISKS RELATED TO MARKET, ECONOMIC OR FINANCIAL VOLATILITY AND OTHER RISKS

  Failure to attract and retain an appropriately qualified workforce could harm results of operations. (Applies to all Registrants)

• DroppedRISKS RELATED TO MARKET, ECONOMIC OR FINANCIAL VOLATILITY AND OTHER RISKS

  Management cannot predict the outcome of the legal proceedings relating to AEP’s business activities. (Applies to all Registrants)

• DroppedRISKS RELATED TO MARKET, ECONOMIC OR FINANCIAL VOLATILITY AND OTHER RISKS

  AEPTCo depends on AEP affiliates for a substantial portion of its revenues. (Applies to AEPTCo)

Reworded

• 77% rewrittenRISKS RELATED TO MARKET, ECONOMIC OR FINANCIAL VOLATILITY AND OTHER RISKS

  The amount of taxes imposed on AEP could change. (Applies to all Registrants)

  The tax risk now expressly includes administrative interpretations and judicial determinations, while retaining potential changes to federal rates, credits and incentives.

• 51% rewrittenRISKS RELATED TO MARKET, ECONOMIC OR FINANCIAL VOLATILITY AND OTHER RISKS

  Supply chain disruptions, tariffs and inflation could negatively impact operations and corporate strategy. (Applies to all Registrants)

  Supply-chain disruptions and shortages are now described as affecting resources, rather than stating delivery restrictions resulted in shortages; tariffs remain a threat.

  Was: Supply chain disruptions, tariffs and inflation could negatively impact our operations and corporate strategy. (Applies to all Registrants)

• 50% rewrittenRISKS RELATED TO MARKET, ECONOMIC OR FINANCIAL VOLATILITY AND OTHER RISKS

  Compliance with legislative and regulatory requirements may lead to increased costs and result in penalties. (Applies to all Registrants)

  No substantive change: the risk still covers broad utility regulation and mandatory civil penalties.

• 50% rewrittenRISKS RELATED TO OWNING AND OPERATING GENERATION ASSETS AND SELLING POWER

  OVEC may require additional liquidity and other capital support. (Applies to AEP, APCo, I&M and OPCo)

  OVEC debt decreased from approximately $997 million to $873 million, and APCo, I&M and OPCo’s collective responsibility fell from $433 million to $379 million.

• 37% rewritten

  AEP could be subject to higher costs and/or penalties related to mandatory reliability standards. (Applies to all Registrants)

  The risk now expressly adds substantial monetary penalties for noncompliance with NERC reliability standards, likely unrecoverable from customers.

• 35% rewrittenRISKS RELATED TO MARKET, ECONOMIC OR FINANCIAL VOLATILITY AND OTHER RISKS

  Downgrades in AEP’s credit ratings could negatively affect its ability to access capital. (Applies to all Registrants)

  AEP now discloses that financial metrics have approached, and may approach, rating-agency downgrade thresholds; the prior AEPTCo holding-company language was removed.

• 31% rewritten

  End-use consumers and entities supplying electricity to end-use consumers may also attempt to influence government and/or regulators to change the rate setting methodologies that apply to AEP, particularly if rates for delivered electricity increase substantially

  No substantive change: the risk still covers siting, financing, construction, permitting, approvals and project-development agreements.

• 30% rewrittenRISKS RELATED TO OWNING AND OPERATING GENERATION ASSETS AND SELLING POWER

  Costs of compliance with existing and evolving environmental laws are significant. (Applies to all Registrants except AEPTCo)

  The risk now emphasizes evolving or newly adopted environmental requirements, agency or litigation-driven CCR changes, and difficulty meeting stricter standards.

• 25% rewrittenRISKS RELATED TO MARKET, ECONOMIC OR FINANCIAL VOLATILITY AND OTHER RISKS

  AEP is subject to physical and financial risks associated with climate change. (Applies to all Registrants)

All 22 risk factors

Headings as the filing states them, in filing order.

About this page

Item 1A of the 10-K on EDGAR was split into its risk factors and, where the company's previous 10-K is on file, each heading was matched to last year's and the text compared word for word. The headings are the filing's own. The one-line readings and the overview were written by a language model from the text of the new, dropped, and rewritten risks; they refer to risks by position and cannot misquote a heading.