American Electric Power has agreed to reduce its return on equity (ROE) rate for its transmission investments in six eastern states and will make a one-time $50 million refund to customers this year, the utility announced.
If the settlement is approved by Federal Energy Regulatory Commission, Columbus, Ohio-based AEP would set a base ROE of 9.85 percent (10.35 percent once an adder is included for regional transmission organization membership) on projects beginning this year. The settlement would affect AEP operating entities in Indiana, Kentucky, Michigan, Ohio, Virginia and West Virginia.
The one-time refund of $50 million to transmission customers would be credited in the second quarter. News report indicated that the impact of recent federal tax reform also impacted the new ROE rate.
“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,” AEP CEO Nicholas Akins said in a statement. “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.”
AEP’s previous base ROE was 10.99 percent. The settlement case stems from a 2016 federal complaint.
AEP’s overall transmission and distribution system serves nearly 5.4 million regulated customers in 11 states.