Dive Brief:
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American Electric Power utilities sold 12.4% more electricity to commercial customers, including data centers, in the second quarter compared to the same period last year, company officials said Tuesday during an earnings conference call.
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“We're going to see more growth than we've seen in maybe generations,” Ben Fowke, AEP interim president, CEO and director, said. “It's going to be really important that that growth is beneficial for all customers and at the worst case, at least neutral.” Bill Fehrman became AEP president and CEO on Aug. 1.
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In an effort to ensure that data centers pay for grid upgrades that are needed to provide them with power, AEP has asked regulators in Ohio for a data center tariff and regulators in Indiana and West Virginia for changes to large load tariffs, Fowke said. That is also the reason why AEP, with Exelon, is challenging an interconnection service agreement for a co-located data center in Pennsylvania, he said.
Dive Insight:
AEP utilities have commitments for more than 15 GW of new load by 2030 driven by data center demand, Fowke said, noting last year they had a peak load of 35 GW.
AEP plans to update its load forecasts in the fall and outline how much the company will need to spend on transmission and generation to serve the growing demand, Fowke said.
“While we certainly encourage innovation when it comes to meeting the energy needs of our customers, data centers included, I want to emphasize that it is critically important that costs associated with these large loads are allocated fairly, and the right investments are made for the long-term success of our grid,” Fowke said.
For the rest of the year, AEP expects data center gains will remain mostly concentrated in Ohio and Texas, said Charles Zebula, AEP executive vice president and chief financial officer.
AEP’s total weather-normalized retail power sales increased 4% in the second quarter from the year-ago period, the Columbus, Ohio-based utility company said in its earnings presentation. Industrial sales increased 1.1% in the quarter and residential sales fell 0.9%.
“Residential load remains weak in most of our territories, likely due to the cumulative effects of inflation,” Zebula said. “Bottom line, the amount of demand from new large loads we're seeing across our system is unprecedented.”
Meanwhile, in June AEP’s Public Service Co. of Oklahoma agreed to buy the 795-MW, gas-fired Green Country power plant in Jenks, Oklahoma. The power plant, built in 2002, is owned by J-Power USA, a subsidiary of Tokyo-based J-Power. AEP expects to seek approval for the deal from Oklahoma regulators this fall and close it by the end of June.
The deal was made outside of a request for proposal process, according to Peggy Simmons, AEP’s executive vice president of utilities.
“With the increased reserve margins that we're seeing from the RTOs and the additional load that we're starting to see across our system, we are going to need some additional generation,” Simmons said.
AEP expects its utilities will add about 20.2 GW by 2033, including about 8.1 GW of wind, 5.9 GW of solar, 5.2 GW of gas and 1 GW of storage, according to the company’s second-quarter earnings presentation. State regulators have approved projects totaling $6.6 billion, with $150 million pending approval, the company said.
Transmission is delivering “significant” shareholder value, according to AEP. It expects transmission earnings will account for 53% of the company’s total income this year.
On the legal and policy front, Fowke said the U.S. Supreme Court’s decision to eliminate the Chevron doctrine is “going to be helpful” in challenging Environmental Protection Agency coal ash, wastewater and other rules.
“I guess all of the rules that have come out we're going to challenge, and for good reason,” he said.
Whether the court’s decision affects the Federal Energy Regulatory Commission “remains to be seen,” he said.
On the financial front, AEP’s second-quarter earnings plunged to $340.3 million, or 64 cents/share, down from $521.2 million, or $1.01/share a year ago, the company said in a press release. Not including one-time items, operating earnings increased to $662 million, or $1.25/share, in the quarter from $582.2 million, or $1.13/share, in the same period in 2023.
AEP’s utilities have 5.6 million customers in Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia.
