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October 13, 2017

Utility Incentives Drive Economic Development

Working with a utility partner on your site selection process provides numerous benefits — a knowledgeable economic development team, local insights and partnerships, and, of course, energy expertise. Many large electric utilities also offer incentives to their clients.

Incentives offered by electric utilities, which are sometimes referred to as riders, typically offer 2 to 5 years of reduced rates. And much like state and local economic development organizations, many utilities require businesses to create a targeted number of new, full-time jobs to qualify.

Utility incentives are a win-win for all parties. Businesses benefit from discounted rates for the first few years of operation in a new facility or after a significant reinvestment, while utilities benefit by adding new customers to their rolls or increasing capacity by finding new occupants for existing buildings within their communities.

AEP Economic Development Incentives

AEP offers incentives to qualifying new and expanding businesses in five of its 11 states — Indiana, Kentucky, Louisiana, Virginia and Texas (SWEPCO).

Though qualifications vary by state, most require new and existing customers to create at least 500 kW of new demand over base level to be considered for an incentive. Meeting these minimum requirements is very easy for high-power users, such as manufacturing facilities and data centers, but also opens up eligibility for less intense electrical users such as office buildings, large retail, and research and development facilities. Additional demand discounts are also available to companies that create and sustain new jobs or make substantial capital investments.

AEP’s Indiana Michigan Power (I&M) recently introduced a new incentive to promote job creation, investment and load growth in its communities. Though I&M already delivers some of the lowest industrial energy rates in the country, they are offering a credit of up to $11.00 per kilowatt to qualified customers.

Revised qualifications for the new incentive, which I&M began offering in August 2017, allows a broader range of businesses to benefit from the incentives. This change allows I&M to better serve its states and communities, which have made substantial investments to create the best climate for economic growth.

Big Benefit for Businesses

Though relatively new, the incentive is already attracting the attention of new prospective customers, as two companies are currently evaluating the increased benefit opportunity delivered by I&M’s new incentive structure. Below are examples of how each company could benefit.

  • Company A has projected a 20 MW demand immediately upon commencement of production at its new facility. Under the previous incentive, the company could have received a discount of approximately $38,000 per month or $456,000 per year. With the new and improved incentive, they could receive a discount of $244,000 per month or $2,928,000 per year*.
  • Company B anticipates a 2.8 MW demand upon start up. The previous incentive offered a discount of $7,400 per month or $88,800 per year. The new incentive discount could be $28,200 per month or $338,400 per year*.

The increased amount and length of the discount underscores I&M’s commitment to being a valuable economic development partner to businesses looking to relocate or expand. For businesses for which energy is one of their greatest raw materials, it is in AEP’s best interest to support community efforts to attract or encourage additional investment from those businesses. Their success is directly tied to ours.

In addition to economic development incentives, AEP also offers a variety of energy efficiency programs to help customers decrease demand and increase savings. These programs are available separate from the utility incentives and companies can participate in them at any time, not just when siting a new location.

*Projected amounts; actual will be based on actual demand and load factor.

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