Charles Zebula
Executive Vice President and Chief Financial Officer at American Electric Power
Thank you, Peggy, and good morning, everyone. Let's jump right into our second quarter results.
Slide 7 shows the comparison of GAAP to operating earnings for the quarter and year-to-date periods. GAAP earnings for the second quarter was $0.64 per share compared to $1.01 per share in 2023. Year-to-date GAAP earnings are $2.55 per share for this year versus $1.78 per share last year. There's a detailed reconciliation of GAAP to operating earnings for the second quarter and year-to-date results on Pages 13 and 14 respectively.
Let's briefly highlight a few of the non-operating items for the quarter that mostly make up the difference between GAAP and operating earnings. First, as disclosed in an 8-K in May, an after tax provision of $126 million for customer refunds was recorded based on recent developments in the remand proceeding related to the cost cap associated with the Turk Plant that has been debated over the last decade.
Secondly, we incurred a $94 million expense associated with a voluntary severance program that we completed in the second quarter.
And finally, as Ben mentioned, the final revised EPA CCR rule became effective in May. We recorded a $111 million accrual for compliance costs largely related to our Ohio properties, where generation is deregulated. We also updated our asset retirement obligations for sites in our regulated entities where we intend to seek cost recovery.
Let's walk through our quarterly operating earnings performance by segment on Slide 8. Operating earnings for the second quarter totaled $1.25 per share or $662 million compared to $1.13 per share or $582 million in 2023. This results in an increase of $80 million, or $0.12 per share, which is a 10.6% increase over last year.
Operating earnings for Vertically Integrated Utilities were $0.46 per share, down $0.05. Positive drivers included favorable year-over-year weather and rate changes across multiple jurisdictions with the 2022 PSO base case and the 2023 Virginia proceeding being the most significant. These items were offset by higher income taxes, which are largely a reversal of favorable income taxes in the first quarter, lower normalized retail sales and higher depreciation. Note, the year-to-date results in this segment consolidate the income tax loss that is shown in this quarter, resulting in an immaterial year-to-date income tax variance versus last year.
The Transmission & Distribution Utilities segment earned $0.41 per share, up $0.11 compared to last year. Positive drivers in this segment included favorable weather, increased transmission revenue, rate changes, primarily from the distribution cost recovery factor in Texas, and higher normalized retail sales. These items were partially offset by increased property taxes and depreciation.
The AEP Transmission Holdco segment contributed $0.39 per share, up a penny compared to last year, primarily driven by investment growth. Generation & Marketing produced $0.12 per share, down a penny from last year. Recall that AEP renewables was sold in the third quarter last year, which has two impacts; a negative earnings variance due to the business being sold and removal of the interest cost for financing these assets. Additional drivers were lower retail margins, offset by higher generation margins and lower taxes.
Finally, Corporate and Other was up $0.06 compared to the prior year, primarily driven by lower income taxes and increased other operating income related to timing in the prior year. These items were partially offset by higher interest expense and lower interest income from the G&M segment.
Let's turn to Slide 9, which shows weather normalized retail sales up 4% in the quarter from a year ago, headlined by a double-digit 12.4% increase in commercial sales, which is where our data processing customers are classified. I'll note that in our T&D segment, the increase in commercial load was over 20% for the quarter. This is a trend that will continue over the coming years based on already signed customer commitments.
Our operating footprint and robust transmission system position us perfectly to grow along AI and other technologies and industries in need of access to affordable and reliable power. Through the remainder of this year, data processing gains will remain mostly concentrated in Ohio and Texas. But beyond this year, we are seeing strong commitment from new customers looking to connect at some of our vertically integrated companies as well.
Outside of data processors, our industrial sales have remained resilient in the face of a slowing economy. Industrial sales were strongest in Texas, driven by an influx of new customers mainly in the energy industry. Thanks to our success over the past few years on the economic development front, we expect to see our industrial sales continue to be resilient in the next few years as several new large customers in steel, energy, renewable energy and semiconductors come online across our footprint.
In the residential segment, we continue to see growth in customer count and load in Texas. But residential load remains weak in most of our territories, likely due to the cumulative effects of inflation. Bottom line, the amount of demand from new large loads we're seeing across our system is unprecedented. We are excited, challenged and poised to embrace this opportunity.
Let's move on to Slide 10. In the top left table you can see the FFO to debt metric stands at 14.6% for the 12 months ended June 30, which is a 40-basis point increase from the prior quarter. Our debt to cap decreased slightly from last quarter and was 62.6% at quarter end. We took credit supportive financing actions in the second quarter by issuing $400 million of equity under our at-the-market program and by issuing $1 billion in junior subordinated notes at the parent, which qualify for 50% equity credit at all three rating agencies. In the lower left part of this slide, you can see our liquidity summary, which remains strong at $5.4 billion and is supported by $6 billion in credit facilities. Lastly, on the qualified pension front, our funding status is near 99%.
In summary, our second quarter results provide additional momentum this year, bringing year-to-date earnings up to $2.52 per share, an increase of $0.28, or 12.5% compared to the same period last year. We reaffirm our operating earnings guidance range of $5.53 to $5.73 and remain committed to our long-term growth rate of 6% to 7%. And as we move through the balance of the year, our focus is on providing reliable and affordable service to our customers, executing our plan, and embracing the growth opportunities that we have ahead of us.
Also, a quick update on the sale of AEP Onsite Partners. We expect the transaction to close in the third quarter and result in approximately $315 million in net proceeds to the company.
I'd be remiss if I didn't acknowledge the skilled leadership of Ben Fowke during this time of transition at AEP. Ben told you that this company would not be in neutral during the transition, and I can say that that is absolutely true. Ben, well, I know you'll still be engaged as an adviser and Board role going forward. I want you to know that the AEP team appreciates your engagement and contributions over the past five months.
Finally, the AEP team looks forward to the arrival of our new CEO and President, Bill Fehrman. We all look forward to Bill, bringing his accomplished leadership to AEP and working with him as we take on the exciting opportunities that we have before us.
Thank you for your interest in American Electric Power. Operator, can you open the call, so we can address your questions? Thank you.
