American Electric Power is creating a new company to handle the interstate transmission of power, a task previously handled at the state level.
This change could allow the Columbus-based utility to receive lower interest rates on its largest transmission projects, a spokesman said.
AEP is calling the new company Transco and is giving it an initial budget of $118 million for 2010.
"The Transco will be our vehicle for much of AEP's future on-system, wholly-owned transmission investment," said Michael Morris, AEP's chairman, president and CEO....MORE
From the Wall Street Journal:
...The new transmission company AEP is forming will operate in the company's current service territory, and will be dedicated to enhancing and improving the grid in that 11-state area, said company spokesman Pat Hemlepp. He added that putting the new company in charge of grid work would get it off the utility units' books and increase transparency for shareholders.
"It's a clearer transmission play in the eyes of investors," Hemlepp said, adding the new company hasn't been named yet and is envisioned as a wholly owned subsidiary of AEP. The company said it expects to invest $118 million in the new company's activities next year.
The new company comes as part of AEP's broader transmission strategy, which includes a joint venture with Warren Buffett's MidAmerican Energy Holdings Co. in Texas and ventures with several other companies elsewhere in the country.
Revamping the transmission grid has become a priority in Washington, as lawmakers try to figure out how to encourage development of renewable energy sources that don't emit the heat-trapping gases blamed for climate change. Building new transmission lines will be key for bringing wind and solar power generated in remote areas to the distant cities that need the power.
AEP currently has a 39,000-mile transmission network in the U.S., and has utility operations through most of the Midwest and parts of the South.
AEP will form a transmission company, or Transco, to pursue new transmission
opportunities within the company's existing 11-state footprint, a key
component in a three-part national transmission strategy. AEP has existing and
planned transmission projects in the Electric Reliability Council of Texas
(ERCOT) through its Electric Transmission Texas joint venture with MidAmerican
Energy Holdings Company. AEP is also pursuing transmission projects outside
its footprint and outside ERCOT through joint ventures with numerous other
companies, including Electric Transmission America, AEP's broader partnership
"The Transco will be our vehicle for much of AEP's future on-system,
wholly-owned transmission investment," Morris said. "These investments will
include a wide range of on-system transmission improvements, things like
greenfield projects, station additions and system upgrades. Pursuing these
activities in a Transco, with formula rates adjusted annually by the Federal
Energy Regulatory Commission (FERC), benefits customers by enhancing AEP's
access to capital. This enables the company to undertake substantial new
investment while relieving our operating company balance sheets of the burden
of meeting those capital demands, thereby allowing them to put capital to work
on distribution and generation needs."
AEP expects to invest $118 million in Transco activities in 2010.
"We are seeking state utility status for the Transco in states where that
designation is required, and we will join both PJM and Southwest Power Pool as
a transmission owner," Morris said. "We plan to file a FERC tariff for the
Transco later this year, with rates effective in mid-2010."...MORE