AEP CEO hopes to have decision soon on Ohio contract

American Electric Power (NYSE:AEP) Chairman, President and CEO Nicholas Akins said Oct. 22 that he expects the Public Utilities Commission of Ohio (PUCO)  to reach a decision about a long-term contract agreement for AEP competitive generation by the end of the year.

During a quarterly earnings call, Akins said Ohio needs to retain some baseload generation during a “transition” toward reliance on natural gas-fired power plants and renewables.

There has been a two-year process occurring in Ohio, Akins said. The executive added that AEP and, for that matter, FirstEnergy (NYSE:FE) need clarity to make investment decisions.

“Our expectation has been a long-term PPA [power purchase agreement] … that we can depend on and make the investments we need to make,” Akins said. A three-year contract is not enough, he said.

AEP needs to get an answer from Ohio on whether it will be able to get a long-term contract for portion of its current competitive generation fleet. AEP hopes to get that decision soon so it can decide “whether we hold those units or not,” Akins said.

If a PPA is agreed upon, not all of AEP’s competitive plants in the state would be covered, Akins said.

“We’ll have a result pretty soon and the PPA is very, very important to our standing in Ohio … and whether we keep that portion of generation in Ohio,” Akins said.

“There needs to be some kind of support for this generation in Ohio,” Akins said. There are ongoing discussions on what any ultimate agreement would look like, Akins said.

“If the process is “fully litigated, we still expect to get an answer by the end of the year … we are actually focused on the commission decision itself,” Akins said.

Akins hopes states in AEP territory file CO2 plans with EPA

Regardless of whether states elect to challenge the Environmental Protection Agency (EPA) Clean Power Plan in court, Akins expects most states in AEP territory to file state implementation plans (SIPs) next September.

“Regardless of what you decide to do, you really need to work with us on a state implementation plan,” on carbon reduction, Akins said.

AEP is also working to complete the recently-announced sale of AEP River Operations to American Commercial Lines (ACL) by the end of the year.

On other subjects, AEP management said the regional economy supporting the shale production is experiencing lost jobs. For example, places such as Shreveport and Abilene have fewer people employed now than in the first of the year.

But shale gas development still drives industrial load growth, AEP officials said. AEP is selling more power to the oil and gas sector although the sector has thousands less employees.

AEP reported third-quarter 2015 earnings, prepared in accordance with Generally Accepted Accounting Principles (GAAP), of $519m or $1.06 per share, compared with $493m or $1.01 per share in 3Q 2014. Operating earnings (GAAP earnings excluding special items) for 3Q 2015 were $521m or $1.06 per share, compared with 3Q 2014 operating earnings of $493m or $1.01 per share.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.