American Electric Power (AEP) takes its slice of the US power pie out of Middle America. The holding company is one of the largest power generators and distributors in the US. AEP owns the nation's largest electricity transmission system, a network of almost 39,000 miles. It also has 223,000 miles of distribution lines. Its electric utilities have 5.3 million customers in 11 states and have about 37,600 MW of largely coal-fired generating capacity. AEP is a top wholesale energy company; it markets electricity in the US. Other operations include coal and bulk commodities barge transportation services.
The company's electric utility operating companies provide generation, transmission, and distribution services to more than five million retail customers in Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia, and West Virginia.
AEP reported a 1% decrease in revenues in 2012, primarily due to Ohio customers switching to alternative power providers, a decrease in weather-related usage in eastern and western regions primarily due to decreases of 15% and 36%, respectively, in heating degree days and a 6% drop in cooling degree days in its western region, and a decrease in regulated revenues due to the elimination of "provider of last resort" charges. It also reported lower margins from off-system sales due to lower market prices, lower PJM capacity payments, reduced trading and marketing margins, and a drop in other revenues due to a decrease in gains on miscellaneous sales.
The company reported that its net income slumped by 35% in 2012 due to lower revenues and an increase in interest expenses.
AEP has scaled back its unregulated non-retail operations in order to focus on its more fiscally reliable regulated businesses. The firm has also sold its independent power production operations and its European trading operations, but it continues to participate in wholesale energy transactions in regions of the US where it owns assets.
Growing its retail business in the US, in 2012 AEP acquired Chicago-based Blue Star Energy and its independent retail electric supplier BlueStar Energy Solutions. The company has about 23,000 customer accounts. The deal also gives AEP the opportunity to hedge the output of its soon-to-be unregulated Ohio power generation.
Seeking to run cleaner, more efficient power plants to comply with regulatory clean air and water standards, AEP has earmarked $1.2 billion through 2020 for further upgrades of its coal-fired generating plants.
Although only a small percentage of its power generation comes from renewables (such as wind and hydro), the company is investing heavily in wind power to ramp up its clean energy sources in response to carbon reduction legislation in the states it serves. By the end of 2012, AEP was operating 310 MW of wind power facilities and had about 180 MW of long-term purchase power agreements for wind power.