AEP CEO Vents Frustration With PJM, Says Membership is Under Review
American Electric Power Co. Chairman, President and CEO Bill Fehrman took aim at the PJM regional transmission organization May 5, saying that his teams “need a faster way to interconnect” its many projects and that PJM’s performance needs to improve.
“AEP continues to identify some issues around how quickly and efficiently load is being connected to generation. The current state of PJM’s performance and stakeholder approval process does not give me great confidence that these issues will be resolved anytime soon,” Ferhman said on Columbus-based AEP’s first-quarter earnings conference call. “If something is not done now, I expect we could still be having these same conversations in 10 years.”
Ferhman, who emphasized that AEP hasn’t made the call to leave PJM, said AEP teams are in the “very early stages” of evaluating the company’s options to stay under the RTO’s structure or possibly set up a generation-company structure along the line of NiSource’s work in Indiana. That structure ringfences new generation costs incurred to serve large-load customers. And he added that AEP is similarly reviewing its membership in the Southwest Power Pool RTO.
The pain point for AEP, Fehrman said, is speed and the ability to respond appropriately to the pressures being put on the grid by large demand growth. Government efforts to move things along on that front, he said, haven’t been encouraging.
Asked about a possible timeline to make a decision on AEP’s participation in PJM, Fehrman didn’t commit but emphasized the need to “solve the speed-to-market issue here” and committed that AEP will work with regulators, the governors of the states where it does business and other stakeholders to enact changes.
Q1 Results and a Larger Capex Plan
Fehrman delivered his PJM comments alongside AEP’s Q1 results, which showed a net profit of $874 million (up from $800 million in the first three months of last year) on revenues of a little more than $6 billion. Across the company’s vertically integrated utilities as well as its transmission and distribution companies, sales to residential and industrial customers were down slightly and flat, respectively, during the quarter compared to the prior-year period. But commercial sales jumped nearly 26% and accounted for almost 36% of total sales.
AEP executives also updated analysts and investors on the company’s spending plans through 2030. Those now total $78 billion, up from $72 billion previously, thanks to the addition of $3.5 billion in approved transmission investments under the umbrellas of PJM and SPP as well as $2.5 billion of gas-fired generation work at the company’s Indiana Michigan Power subsidiary. Fehrman and CFO Trevor Mihalik said they expect AEP can add another $10 billion to that $78 billion as various new projects are finalized.
Shares of AEP (Ticker: AEP) rose more than 2% to nearly $138 after executives reported earnings. Over the past six months, they are up about 15%, an increase that has grown the company’s market capitalization to more than $75 billion.
About the Author
Geert De Lombaerde
Senior Editor
A native of Belgium, Geert De Lombaerde has more than two decades of business journalism experience and writes about markets and economic trends for Endeavor Business Media publications T&D World, Healthcare Innovation, IndustryWeek, FleetOwner and Oil & Gas Journal. With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati and later was managing editor and editor of the Nashville Business Journal. Most recently, he oversaw the online and print products of the Nashville Post and reported primarily on Middle Tennessee’s finance sector as well as many of its publicly traded companies.