CEO: AEP looking for ‘critical mass’ around transmission

American Electric Power (NYSE:AEP) is currently looking to strike multiple joint ventures in the territories in which it operates and in adjacent territories, President and CEO Nick Akins told TransmissionHub on the sidelines of the 4th Annual EnergyBiz Leadership Forum on March 20.

The Columbus, Ohio-based utility specifically is looking for partnerships in the PJM Interconnection, the Midwest ISO, the Southwest Power Pool and ERCOT, Akins said.

“We’re trying to get critical mass around transmission, so we are dealing with those adjacent systems to us so we can fully understand and can get the projects through quickly,” he said. “We’ll do multiple joint ventures with parties so we can move forward with specific projects,” both incumbent and competitive, he added.

When building transmission lines, AEP prefers to minimize the number of transmission counterparties involved in the process, as doing so usually can also require fewer regulatory approvals and simplify cost allocation issues, Akins said.

“It’s much easier to go through a single process within a regional transmission organization and with one counterparty, so if there’s a project that goes from our system to Duke [Energy’s] or to Dominion [Resources’], it’s much easier to talk to them about what are the interfaces that exist,” Akins said. “If you try to cross three or four states with a large transmission project, it’s much more difficult to [resolve] the cost allocation aspects of transmission, which has historically been what’s held back transmission.”

As cost allocation issues are resolved, a goal FERC Order 1000 seeks to achieve, transmission investment and development will take off, Akins said.

The CEO noted still other hurdles to transmission development, however, including the amount of time it can take for a project to receive permitting. Asked whether the Obama Administration’s Rapid Response Team for Transmission will be effective in shuttling transmission projects more quickly through siting and permitting process, he said, “I just haven’t seen much movement in those projects, and as a matter of fact they get hung up on the same issues we talked about,” including cost allocation.

However, transmission is on the brink of a historic change.

“I think the prospects are good for transmission and I think it really is coming to a point where as we further optimize the grid with the transformational changes that are occurring, transmission will be a big part of that,” Akins said.

Transmission lately has been talked about largely in connection with the development of renewables, but its potential should not be limited to the renewable buildout, Akins said. With the retirements of coal-fired generation and the introduction of new gas-fired generation and energy efficiency on the system, transmission needs to be seen as a resource in and of itself, he said.

“There are several different layers of transmission – there’s large interstate capability not only to bring coal-fired generation, natural gas-fired generation across the grid, but also [capability] to do the smaller projects that rehabilitate the grid and make it much stronger going forward,” he said.

AEP is a coal-heavy utility that is looking to diversify more into natural gas generation as it complies with EPA regulations.

The company currently has two transmission joint ventures, Electric Transmission Texas with MidAmerican Energy, and Pioneer Transmission with Duke Energy (NYSE:DUK).

Podcasts of Akins’ comments are below. Click the link to listen to his comments.

About Rosy Lum 525 Articles
Rosy Lum, Analyst for TransmissionHub, has been covering the U.S. energy industry since 2007. She began her career in energy journalism at SNL Financial, for which she established a New York news desk. She covered topics ranging from energy finance and renewable policies and incentives, to master limited partnerships and ETFs. Thereafter, she honed her energy and utility focus at the Financial Times' dealReporter, where she covered and broke oil and gas and utility mergers and acquisitions.