Dive Brief:
- American Electric Power expects the weather-normalized retail electric load across its 11-state service area will grow about 8.6% a year, on average, over the next three years, driven by new data centers and industrial facilities, company officials said during a quarterly earnings conference call on Thursday.
- AEP’s load growth estimate is based on customers making financial commitments to bring online facilities that would use about 20 GW, according to the utility company. That could require $10 billion in spending on transmission, distribution and generation infrastructure that isn’t in AEP’s $54 billion, five-year capital plan, said Bill Fehrman, AEP president and CEO.
- AEP has started early site permit work to build small modular reactors in Indiana and Virginia and is in talks with potential offtake customers, according to Fehrman. The company is “quite a ways away from having anything firmed up or really any firm structure at this point,” however, he said.
Dive Insight:
AEP expects its weather-normalized commercial sales, which include data centers, will grow by 23.9% this year and by 19% and 16.1% in the following two years, according to an earnings call presentation. Industrial sales are expected to increase 1.9%, 4% and 7% in the same period, the Columbus, Ohio-based utility company said.
Despite scant growth from the residential sector, AEP forecasts its overall weather-normalized retail sales will climb 8.8%, 8.4% and 8.9% from 2025 to 2027. Sales grew 3% last year.
AEP’s data center customers haven’t changed their development plans since Chinese startup DeepSeek released two high-performing AI models in January that appear to use significantly less electricity than other options, according to Fehrman.
“Really no change in plan for us at all,” Fehrman said. “It's been full-speed ahead.”
AEP is supporting data center development through an agreement to buy up to 1 GW of fuel cells from Bloom Energy this year, according to Fehrman. Last week, Ohio AEP filed applications at the Public Utilities Commission of Ohio for permission to supply about 100 MW of fuel cells to existing data centers owned by Amazon Data Services and Cologix Johnstown.
Amazon and Cologix will use the fuel cells to expand their data centers until new high-voltage transmission is built in the central Ohio area to provide them with grid power, according to the applications. The Amazon data center will be supplied with a Bloom fuel cell system under a 6-year contract, and Cologix will have a 15-year contract.
“Once the necessary infrastructure is connected to these large customers, they can use the fuel cells as backup generation, further adding resiliency to their operations,” Fehrman said.
AEP aims to make sure new load pays for the infrastructure upgrades needed to bring it online, Fehrman said, pointing to pending large load rate tariffs in Ohio and Indiana.
AEP’s $54 billion capital expenditure plan jumped nearly 25%, from $43 billion a year ago. It expects the biggest share of its spending over the next five years, about $20.6 billion, will go to transmission. The transmission spending represents about 55% of AEP’s expected earnings this year, according to the company.
On the financial front, AEP’s 2024 earnings jumped 36%, to $3 billion, or $5.60 a share, from $2.2 billion, or $4.26 a share, the year before, which included various one-time losses, according to a press release. AEP’s revenue grew to $19.7 billion last year from $19 billion in 2023.
AEP’s utilities have about 5.6 million customers in Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia.
