By Ted Caddell
Record cold weather and falling natural gas prices helped push American Electric Power’s first quarter earnings up 12%.
CEO Nicholas Akins said the first quarters of 2015 and 2014 were the “coldest and second-coldest winters, respectively, in our service territory during the past 35 years.”
The increased power demand, coupled with natural gas prices that dropped 43% over the first quarter of 2014, helped AEP show a profit of $629 million on revenue of $4.7 billion ($1.29/share), up from $560 million ($1.15/share) last year.
As a result of the fall in natural gas prices, AEP burned almost 15% less coal in the first quarter than a year ago.
The company also has benefited from power demand from shale oil and gas producers in the Marcellus and Utica fields.
Akins used the quarterly earnings conference call and the company’s annual meeting last week to express his continued frustration with PJM’s capacity market and repeat his call for regulatory changes in Ohio.
“It is clear that the Rube Goldberg capacity market of PJM cannot be depended upon to provide consistent revenue and price discovery to enable the long-term investment potential and maintenance of existing baseload generation. Ohio must regain control of its ability to define resources within the state,” he said.
Akins said that PJM’s capacity performance proposal “is a step in the right direction and should be a no-brainer to FERC.” (See FERC OKs PJM Request to Delay Capacity Auction.)
But he suggested AEP may not wait much longer for changes, renewing talk that the company will sell its merchant generation. It acknowledged in January that it had hired Goldman Sachs to investigate the sale of its merchant fleet in Ohio and Indiana. (See AEP Considering Sale of 8,000 MW in Ohio, Indiana.)
“Right now, there is no support for long-term investment in the state of Ohio, and we’re trying to get that fixed from an energy-policy perspective,” Akins told reporters following the company’s annual shareholder meeting Tuesday. The company failed in February in its bid to secure regulatory approval for a “guaranteed price” power purchase agreement for one of its coal-fired plants. It has another case pending for four more of its plants. (See “PUCO Rejects AEP’s Guaranteed Income Plan for Coal Plants” in State Briefs, March 2, 2015.)
Akins didn’t seem optimistic about the chances for winning regulatory changes. “At this point, looking at it, you would need to lean toward that direction [of selling the unregulated plants] because there clearly is volatility in that business, and it’s very difficult to invest,” he said.