About Our Business

AEP Transmission

AEP Transmission Holding Company (AEPTHCo) is a holding company for all AEP Transmission companies (AEPTCoTranscos) and for joint ventures with other utilities. The AEP Transmission Holding Company’s (AEPTHCo) contribution to company earnings in 2014 totaled $151 million, exceeding a $141 million target. On an earnings-per-share basis, that equates to $0.31 per share vs. a target of $0.29 per share. AEPTHCo’s $1 billion in capital spending and joint venture equity contributions in 2014 exceeded a target of $782 million.

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AEPTCo Transcos

The Transcos own and operate transmission assets that are physically connected to AEP’s existing system. As of December 31, 2014, AEP’s Transcos had $1.8 billion of transmission assets in service with plans to build approximately $3 billion of additional transmission assets through 2017.

The Transcos rates are regulated by the Federal Energy Regulatory Commission (FERC). The Transcos are independent of, but overlay, the service territories of AEP’s regulated state utility companies. They can separately raise capital and are able to build new transmission without affecting the balance sheet or credit ratings of the operating companies.

AEP Indiana Michigan Transmission Company, AEP Ohio Transmission Company, AEP Oklahoma Transmission Company, AEP West Virginia Transmission Company, and AEP Kentucky Transmission Company are operational. These companies currently have transmission assets that are in service or under construction. The Appalachian Transmission Company has received conditional approval from the Virginia State Corporation Commission, subject to project-by-project review and approval. The application for regulatory approval of AEP Southwestern Transmission Company (SW Transco) was denied by the Arkansas Public Service Commission in an order issued Jan. 2, 2015. The application for SW Transco in Louisiana is still pending.

The Transcos are geographically located to align with our utility operating companies and are focused on:

Regional projects: The retirement of an unprecedented number of coal-fueled power plants across the United States over the next few years will have a significant impact on the performance of the transmission grid. As AEP prepares to retire more than 6,500 MW of its own coal-fueled units, we will make significant investments to support the grid by reconfiguring and enhancing regional transmission assets to ensure continued reliability. In addition, both SPP and ERCOT have launched major initiatives to enhance the capacity and capability of their transmission grids.

Local reliability projects: Local transmission facilities that are 100-kV and lower account for the majority of AEP Transmission facilities. This infrastructure tends to be older and more susceptible to reliability threats. Local reliability projects are focused on reducing the frequency and duration of customer outages served by these facilities

Aging infrastructure: Addressing aging infrastructure is another focus, as 65 percent of AEP’s transmission lines were built more than 40 years ago. This can result in significant operations and maintenance costs and reliability issues as these physical assets reach the end of their useful life. AEP Transmission plans to evaluate and prioritize the targeted replacement of these assets, resulting in a potential $9 billion to $12 billion investment over time.

Customer-driven projects: In addition to addressing the aging infrastructure and improving reliability, AEP Transmission is responding to the accelerated demand for service from shale gas customers. Our transmission system is surrounded by major shale plays, such as the Marcellus and Utica shale formations in the East and the Eagle Ford formation and Permian Basin in the West. Oil and gas processing facilities are rapidly being developed that require quick, reliable transmission service. AEP Transmission’s technology strategy has supported this growth by accelerating the execution of infrastructure projects, enabling oil and gas customers to begin operations in as short a time as six weeks.

Based on approved projects, the infrastructure improvements our transmission business will make between 2015 and 2019 will result in approximately 270 new or enhanced stations, more than 1,000 line miles of new transmission lines and more than 2,880 miles of rebuilt transmission lines.

Joint Ventures

We continue to support the joint ventures we formed with other utilities to build new transmission assets within and outside of our service territory. These partnerships allow us to leverage both expertise and financial assets. Many of them modernize the grid and improve reliability, alleviate congested power corridors and facilitate the development of renewable generation.

Electric Transmission Texas (ETT)

Electric Transmission Texas (ETT), a 50/50 joint venture between subsidiaries of AEP and Berkshire Hathaway Energy Company (formerly MidAmerican Energy Holding Company), completed the largest transmission construction project in AEP’s history in 2013. ETT operates in ERCOT and is an operating utility with a growing rate base. In 2013, ETT finished seven new 345-kilovolt (kV) transmission lines and two 138-kV transmission line rebuilds (approximately 590 pole miles) and other facilities, marking the conclusion of an approximately $1.5 billion investment to support the Texas Competitive Renewable Energy Zones (CREZ) program. CREZ reflects the state of Texas’ commitment to renewable energy.

In addition to CREZ, ETT is currently working on projects totaling nearly 320 miles of transmission lines and 12 company-owned substations with various in-service dates through 2022.

Electric Transmission America (ETA)

Electric Transmission America (ETA) is a 50/50 joint venture between subsidiaries of AEP and Berkshire Hathaway Energy Company (formerly known as MidAmerican Energy Holdings Co). ETA has a 50 percent ownership interest in Prairie Wind Transmission; Westar Energy holds the remaining 50 percent. The SPP approved the project in April 2010. The project consists of 345-kV double-circuit transmission lines, running from an existing substation in Wichita, Kan., to a new substation northeast of Medicine Lodge, Kan., and then south to the Kansas/Oklahoma border. The approximately $160 million line enhances the delivery of electricity in Kansas and supports the state’s expansion of renewable energy. This project was completed in 2014.

Pioneer Transmission

Pioneer Transmission is a 50/50 joint venture between AEP and Duke Energy to build and operate transmission lines and related facilities in Indiana. The total project calls for 286 miles of new 765-kV transmission line linking Duke Energy’s Greentown substation near Kokomo, Indiana, to AEP’s Rockport substation near Evansville, Indiana.

In December 2011, the approximately 70-mile Reynolds-to-Greentown segment of the Pioneer project was approved by the Midcontinent Independent System Operator (MISO). Pioneer and Northern Indiana Public Service Company are jointly developing this segment, which is scheduled to be completed in 2018 and has a total estimated cost of $350 million.

Competitive Regulated Transmission

In April 2012, AEP became the first traditional regulated utility to form a competitive business for transmission with the launch of Transource® Energy, a joint venture between AEP and Great Plains Energy (GPE). Expanding Transmission’s growth strategy portfolio, Transource® is a subsidiary of AEP Transmission Holding Company, the holding company for the transcos and joint venture projects. Transource® proactively positions AEP to pursue projects that result from FERC Order 1000 within the PJM Interconnection, SPP and MISO, as well as additional projects.

On Jan. 2, 2014, two projects in Missouri were transferred from Great Plains Energy to Transource®. The projects were approved by the Missouri Public Service Commission and the SPP. FERC also approved the establishment of a base rate formula and incentives for the projects. The smaller of the two projects is expected to be in-service in 2015 while the larger project has an expected in-service date of 2017.

The main driver behind AEP’s competitive transmission business is FERC Order 1000, which was issued in 2011. The Order fundamentally changed how transmission facilities will be developed, owned and operated as well as how costs will be supported. We are encouraged by and supportive of FERC’s decision to consider public policy in the transmission planning process, including economic and reliability considerations, the facilitation of the integration of renewable energy into the grid, and environmental regulations. The order mandates that the regional and inter-regional cost allocation methodologies follow a set of principles and requires RTOs and transmission providers to offer evidence in their compliance filings. The key principles require cost allocation methodologies to be closely tied to the benefits that are calculated as part of the transmission planning process.

Learn more about AEP’s current regulatory activity

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