COLUMBUS, Ohio, April 19, 2018 – American Electric Power (NYSE: AEP) has reached a settlement agreement related to the return on equity (ROE) for transmission investments in AEP’s eastern operating companies and transmission companies (Transcos). These include entities in Indiana, Kentucky, Michigan, Ohio, Virginia and West Virginia. The settlement was filed with the Federal Energy Regulatory Commission (FERC) March 28.
If approved by FERC, the agreement sets a base ROE of 9.85 percent (for a total ROE of 10.35 percent including an adder AEP receives as a Regional Transmission Organization member), effective Jan. 1, 2018. AEP’s previous base ROE was 10.99 percent. The cap on equity for AEP’s eastern transmission projects will be 55 percent. AEP also will make a one-time refund of $50 million to transmission customers for periods prior to 2018 that will be credited in second-quarter 2018.
“This agreement will provide certainty for our investors and allow AEP to move forward with our transmission investments as we continue building a smarter, more reliable and resilient system,” said Nicholas K. Akins, AEP chairman, president and chief executive officer. “Our capital investment plans and transmission earnings forecasts are unchanged. We will continue our plans to invest $8.4 billion in transmission projects in PJM Interconnection, Southwest Power Pool and the Electric Reliability Council of Texas over the next three years, allowing us to improve service to customers and communities by enhancing the reliability, resilience and efficiency of the grid, integrating new generation, relieving market congestion and supporting economic development.”
As part of the settlement, AEP filed updated transmission formula rates that incorporate the benefits of tax reform for transmission customers. FERC approved these new rates on an interim basis April 4. The tax benefits total approximately $163 million for 2018. Formula rates allow the benefits of tax reform to flow through to customers in a timely manner.
The settlement addresses an October 2016 complaint pursuant to section 206 of the Federal Power Act. In response, AEP filed to make revisions to the existing formula rates, including changing the rate from a partially to fully projected rate. In November 2017, FERC issued an order setting the hearing schedule and directing the parties to engage in settlement discussions.
American Electric Power, based in Columbus, Ohio, is focused on building a smarter energy infrastructure and delivering new technologies and custom energy solutions to our customers. AEP’s more than 17,000 employees operate and maintain the nation’s largest electricity transmission system and more than 224,000 miles of distribution lines to efficiently deliver safe, reliable power to nearly 5.4 million regulated customers in 11 states. AEP also is one of the nation’s largest electricity producers with approximately 33,000 megawatts of diverse generating capacity, including 4,200 megawatts of renewable energy. AEP’s family of companies includes utilities AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana and east Texas). AEP also owns AEP Energy, AEP Energy Partners, AEP OnSite Partners and AEP Renewables, which provide innovative competitive energy solutions nationwide.