AEP Leaders Bump Capex Plan to $100B
The leaders of American Electric Power Co. have rolled forward the company’s five-year capital spending plan, adding about $5 billion to their distribution projects forecast as well as roughly $4 billion in new transmission work. In all, the Columbus-based utility is now on pace to spend $100 billion from next year through 2031—and that figure includes “a fairly conservative” estimate of growth investments in Texas.
After he and his team reported AEP’s third-quarter results ($1.19 billion in net income on revenue of $6.83 billion), Chairman, President and CEO Bill Fehrman said the company’s teams are moving quickly to keep up with growth in its service territories, which reach from Virginia and the Great Lakes to southwest Texas.
“We expect demand on our system to more than triple by 2031, created by substantial economic development activity throughout our footprint,” Fehrman said. “What sets AEP apart is not simply the scale of that growth, but where it is occurring. The 11 states we operate in generate roughly one-quarter of U.S. GDP and are attracting significant investment from data centers, manufacturing activity and energy infrastructure.”
AEP’s new capex plan is $22 billion larger than its 2026-2030 predecessor, which had itself gown from $72 billion earlier this year. It assumes that AEP’s rate base will grow at an eye-popping 13% annually through 2031. By the end of the five-year window, Fehrman and his team now think the company’s rate base, which was $62 billion in 2022 and is today about $85 billion, will grow to $162 billion by the end of 2031.
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The $100 billion capital plan as it stands today calls for AEP to spend $20 billion next year and $24 billion and $21 billion in 2028 and 2029, respectively, before tailing off a bit in the early 2030s. But Fehrman and CFO Trevor Mihalik are modeling that the company’s earnings will grow by 10% annually further into next decade and Fehrman last week told analysts that executives “want to make sure we underpromise and overdeliver.” That applies to plans in Texas, where Mihalik said the investments now in the plan are focused on reliability and resiliency and only some of the expected transmission expansion AEP should get a piece of.
When it comes to transmission spending more broadly, the AEP team now plan to allocate $37 billion through 2031, an increase from about $33 billion three months ago. Distribution work plans also have grown and are now $22 billion compared to $17 billion under the previous plan.
FirstEnergy Signals Jump in Transmission Spending
Also planning a big bump in spending are the leaders of FirstEnergy Corp., which serves more than 6 million customers in six states. Chairman, President and CEO Brian Tierney and his team recently told investors that their next update on capital spending—the company today is working on a $36 billion five-year plan—will feature a sizable jump in transmission work.
The FirstEnergy team said the company today has 7.9 gigawatts of contracted demand from large-load customers, which is nearly twice as much as on Jan. 1. In addition, it is in talks that comprise another roughly 4 gigawatts of load. Those growth projections, they said after reporting third-quarter results, mean they will ramp up investment in transmission lines by at least a quarter from the $19 billion that’s part of the current five-year plan.
“Growing electricity demand is expanding the opportunity across our business,” Tierney told analysts last week. “Transmission and distribution remain the foundation of our strategy and an expanding runway for investment needs.”
FirstEnergy’s transmission rate base has grown 14% over the past year. CFO Jon Taylor told analysts that each gigawatt of contracted demand translates into about $250 million of transmission investment but that “most of the increase you’ll see [in the company’s update early next year] is from the work that we need to do on our existing system to stabilize, provide better reliability, provide better resiliency […] just given what we’re seeing across our footprint.”
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.
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