Dive Brief:
- American Electric Power (AEP) reported earnings of $390 million for Q2 2014, compared with $338 million for the same period last year.
- Year-to-date earnings were $950 million for 2014, up from $701 million over the same period last year.
- "Investments in infrastructure," "system improvements" and a "focus on transmission" boosted the company's rate base and earnings, according to AEP CEO Nicholas Akins.
Dive Insight:
AEP continues to experience strong transmission and regulated utility growth, according to CEO Nick Akins. Weather-normalized load grew 2.3% in the second quarter, another positive sign.
AEP is also looking ahead to the EPA's Clean Power Plan. "Rational timing and targets are absolutely critical in achieving substantial reductions in CO2 emissions," Akins said on the utility's earnings call. "The current plan is much too aggressive in many states."
Akins pointed to several flawed assumptions of the EPA plan:
- Natural gas generation will run at 70% capacity factor
- Coal units can achieve 6% efficiency gains
- Energy efficiency will grow 1.5% annually
A 70% capacity factor for natural gas "is not credible," according to Akins, while a 1% efficiency gain at coal units is "viable even if capacity factors remain high, which won't happen." EPA's project 1.5% efficiency growth "certainly goes beyond aspirational thinking," Akins said, as the Electric Power Research Institute "has determined only 0.5-0.6% can be achieved annually."
Critically, Akins noted that a staggering 80% of generating units scheduled for retirement in 2015 were "called upon and ran during the second quarter" -- a quarter which had "essentially no extreme weather conditions."