68 added · 125 removed between the two most recent 10-Ks. The risks a company starts — or stops — disclosing are often the story.
Newly disclosed
The occurrence of any of the following could reduce future net income and cash flows and negatively impact financial condition: • If regulated utility earnings exceed the return established by a relevant commission, that commission could reduce future rates; • The overturning or reversal on appeal of previously authorized recovery; and 19 • Any legislation, regulatory action or litigation outcome that triggers a reversal of a regulatory asset or deferred cost or establishment of a regulatory liability.
A security breach of AEP’s physical assets or information systems, or those of AEP’s competitors, vendors, business partners and interconnected entities (including RTOs) could materially impact AEP by, among other things, impairing the availability of electricity transmitted and distributed by AEP and/or the reliability of generation, transmission and distribution systems, damaging grid infrastructure, interrupting critical business functions, impairing the availability of vendor services and materials that AEP relies on to maintain its operations, or by leading to the theft or inappropriate release of certain types of information, including critical infrastructure information, system data and architecture, sensitive customer, vendor, or employee data, or other confidential data.
If a material physical or cybersecurity breach or disruption were to occur, AEP’s reputation could be negatively affected, customer confidence in AEP could be diminished and AEP could be subject to legal claims, regulatory exposure, loss of revenues, and increased costs, including infrastructure repairs or operations shutdown, all of which could materially affect AEP’s financial condition and materially damage its business reputation.
The continued increase in federal and state regulatory requirements related to cybersecurity and evolving threat actor-capabilities could require changes to measures currently undertaken by AEP or to its business operations and could adversely affect its financial condition. 23 The failure of AEP or third-party vendor information technology systems, or the failure to enhance existing information technology systems and implement new technology, could adversely affect AEP.
Advancements in artificial intelligence and other emerging technologies may require significant changes to the size, skills, and composition of AEP’s workforce, and the inability to adapt to these evolving talent needs could exacerbate existing workforce challenges and adversely affect AEP’s operations and financial performance.
Compliance with the sometimes evolving criteria of these legal requirements (including any newly adopted requirements and/or more stringent application of existing regulations, including CCR requirements that could result from either agency action or litigation) can be difficult.
While management believes AEP complies with current prevailing laws and regulations, there can be no assurance that AEP’s efforts will be deemed to have been sufficient in a litigation or regulatory review context.
Much of this demand is driven by interconnecting with and providing power to data centers and other large load customers to serve an increasingly digital economy and to support AI.
Attacks and disruptions, which could involve physical, cyber and hybrid targeting of physical and cyber assets, are increasingly sophisticated and dynamic.
In addition, the rapid evolution and increased adoption of AI technologies may intensify AEP’s cybersecurity risks.
(Applies to all Registrants) AEP’s business and capital investment plans for the construction of new projects, including providing service to new data centers and other large load customers, involve execution risks that could adversely affect AEP’s financial performance and/or impair AEP’s ability to execute on these plans.
These risks include delays, supply chain disruption and the unavailability of materials, cost overruns, inflation, the cost and availability of capital, labor disputes or shortages and other factors that could cause the total cost and timing of any project to exceed estimates.
No longer disclosed
Management is unable to predict the course, results or impact, if any, of current or future litigation or investigations relating to the severe winter weather in Texas in February 2021.
(Applies to all Registrants) On March 24, 2024, the SEC adopted new rules relating to the disclosure of a range of climate-related risks.
A security breach of AEP or its regulated utility businesses’ physical assets or information systems, interconnected entities in RTOs, or regulators could impact the operation of the generation fleet and/or reliability of the transmission and distribution system.
A major cyber incident could result in significant expenses to investigate and repair security breaches or system damage and could lead to litigation, fines, other remedial action, heightened regulatory scrutiny and damage to AEP’s reputation.
Any legislation, regulatory action or litigation outcome that triggers a reversal of a regulatory asset or deferred cost generally results in an impairment to the balance sheet and a charge to the income statement of the company involved.
In addition, the misappropriation, corruption or loss of personally identifiable information and other confidential data could lead to significant breach notification expenses and mitigation expenses such as credit monitoring.
A successful cyber-attack on the systems that control generation, transmission, distribution or other assets could severely disrupt business operations, preventing service to customers or collection of revenues.
The Federal government has notified the owners and operators of critical infrastructure, such as AEP, that the conflict between Russia and Ukraine has increased the likelihood of a cyber-attack on such systems.
(Applies to AEP and AEP Texas) As a result of the February 2021 severe winter weather in Texas which caused a shortage of electric generation, ERCOT instructed AEP Texas and other Texas electric utilities to initiate power outages to avoid a sustained large-scale outage and prevent long-term damage to the electric system.
In February 2021, AEP Texas received a Civil Investigative Demand from the Office of the Attorney General of Texas requesting, among other data, information about its communications to and from ERCOT, PUCT, retail electric providers, utilities, or power generation companies, concerning power outages related to the February 2021 winter storm.
AEP has made significant progress in reducing GHG emissions from its power generation fleet and while we aspire to be at net-zero Scope 1 and 2 emissions by 2045, our performance will ultimately be driven by the needs and desires of the states we serve.
Management is unable to predict the course or outcome of these or any future litigation or investigations or their impact, if any, on future results of operations, financial condition and cash flows.