American Electric Power Company, Inc. · NASDAQ:AEP
American Electric Power — Investor Presentation (March 2017)
35 slides from American Electric Power's investor presentation, Mar 24, 2017
Slide 1: Transmission Formula Rate AEP East Operating Companies
Transmission Formula Rate AEP East Operating Companies Annual Update March 24, 2017 1
Slide 2: Section 205 FERC Filing
Section 205 FERC Filing • AEP filed Section 205 November 22, 2016, modifying Attachment H-14A and H-14B of the PJM OATT • FERC issued an Order March 10, 2017, accepting (subject to refund) those modifications • AEP calculated its Projected Transmission Revenue Requirement (PTRR) for rates effective
Slide 3: Section 205 FERC Filing (continued)
Section 205 FERC Filing (continued) • Previously, AEP’s formula rates were billed on projected plant and actual FERC Form 1 expenses, paid July 1-Dec 31, 2016. • True-up was based on average historic plant investment and actual FERC Form 1 balances. • Cost recovery for any given rate year would not
Slide 4: Section 205 FERC Filing (continued)
Section 205 FERC Filing (continued) • Transition to fully projected (“PTRR”) formula rate • Pro-rate property-related accumulated deferred income taxes (“ADIT”) per IRS rules • Provide deferred tax liability and flow-through • Minor modifications to protocols • Provide billing credit for existing cu
Slide 5: Billing Transition
Billing Transition • The 2017 PTRR updated rates – included in March bill (billed in April) • For January and February, PJM will make prior period adjustments to the bills. – NITS – spread the Jan/Feb under-collection over 8 months, beginning with March billing – Schedule 12 – reflect the Jan/Feb ov
Slide 6: Federal Energy Regulatory Commission (FERC)
Federal Energy Regulatory Commission (FERC) • FERC has accepted other forward- looking formula rates • Not a departure from ratemaking practice • Customers pay only transmission costs (no more or less) – mitigates lag 6
Slide 7: Benefits to Customers
Benefits to Customers • Matches rates to service • Reduces true-up • Reduces interest • PTRR consistent with PJM billing process, new NSPL beginning January 1 • True-up ensures customers pay actual revenue requirement based on FERC Form 1 reports, no more and no less 7
Slide 8: Future True-ups
Future True-ups • 2016 true-up of the previous formula rate will be computed, filed, and posted on the PJM/AEP website by May 25, 2017 (as done in the past) – Any over/under recovery with interest will be included in the PTRR effective January 1, 2018, and posted on the PJM/AEP website by October 31
Slide 9: AEP East Zone Network Service Peak Load
AEP East Zone Network Service Peak Load • NSPL (1 CP) – 2015 NSPL February 20, 2015 (winter peak) • Hour 08 24,725.1 MW – 2016 NSPL August 11, 2016 (summer peak) • Hour 15 22,475.7 MW 9
Slide 10: Operating Company Rates
Operating Company Rates • Previous Billed Rate – Rates effective July 1, 2016 • billed July – December, 2016 • $84.88/MW-Day (2015 NSPL 24,725.1 MW) • Projected Rate update (PTRR) – Rates effective January 1, 2017 Average B/E Projected Ratebase Balances (2016-2017) and Projected 2017 O&M Expense • b
Slide 11: Regulatory Changes
Regulatory Changes • Depreciation rates revised for Kingsport Power Company 11
Slide 12: AEP.com Website Posting
AEP.com Website Posting for Rates Effective January through December, 2017 • Notice of Annual Filing • Annual Update Customer Meeting Notice • Formula Rate Update AEP Operating Companies Summary http://www.aep.com/about/codeofconduct/ • ATRR Summary of AEP Operating Companies OASIS/TariffFilings/ •
Slide 13: Operating Company Rate Summary
Operating Company Rate Summary July 1, 2016* Projected ** Total Change Charge 2015 FERC Form 1 January 1, 2017 and % Change (projected plant 2016 (projected B/E historical 2015) 2016/2017 plant) Point-to-Point Rate $448.90 $/MW-Month $2,581.64 $3,030.54 17.4% Schedule 12 ATRR (10,688,259) $54,479,93
Slide 14: Reliability Enhancement
Reliability Enhancement “Baseline vs Backbone Project” • PJM’s RTEP, Regional Transmission Expansion Plan, identifies system additions and improvements needed to keep electricity flowing to millions of people. • PJM “Backbone” projects are a subset of “Baseline” projects, identified by PJM to resolv
Slide 15: Reliability Enhancement “Backbone Project”
Reliability Enhancement “Backbone Project” b1660.1 - Rebuild Amos- Kanawha River 138kV corridor Driver: Generator Deactivation b2020 - Cloverdale – install 6 765kV breakers including incremental work for 2 additional breakers; reconfigure and relocate miscellaneous facilities; establish 500kV statio
Slide 16: Reliability Enhancement “Baseline Project”
Reliability Enhancement “Baseline Project” b1032.2 - Construct two 138kV outlets to Delano 138kV station and Circleville station; install new 138 kV breaker string at Delano station to terminate new line. Driver: Baseline Load Growth Deliverability & Reliability b1818 - Expand Allen station by insta
Slide 17: Revenue Requirement (Summary Line 8)
Revenue Requirement (Summary Line 8) used to calculate the PTRR Revenue Requirement 17
Slide 18: Gross Plant Investment
Gross Plant Investment Prior Year Projected vs. PTRR B/E Balance $8,000 $7,500 $7,000 $6,500 $6,000 $5,500 In Millions $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 APCo I&M KPCo KgPCo OPCo WPCo AEP East OPCo's 2011 Projected $1,934,693,178 $1,194,357,912 $460,203,821 $21,31
Slide 19: Transmission O&M Expense
Transmission O&M Expense 2016 Projected (Actual 2015) vs 2017 Projected 19
Slide 20: Schedule 1A
Schedule 1A AEP Annual Line Revenue No. Requirement A. Schedule 1A ARR 1 Total Load Dispatch & Scheduling (Account 561) (TCOS Line 15) $32,427,739 Less: Load Disptach - Scheduling, System Control and Dispatch Services 2 (321.88.b) $14,705,536 Less: Load Disptach - Reliability, Planning & Standards D
Slide 21: Questions?
AMERICAN i ELECTRIC POWER —_ F i \ 21
Slide 22: Transmission Formula Rate AEP East Transmission Companies
Transmission Formula Rate AEP East Transmission Companies Appalachian, Indiana Michigan, Kentucky, Ohio and West Virginia Annual Update March 24, 2017 22
Slide 23: Section 205 FERC Filing
Section 205 FERC Filing • AEP filed Section 205 November 22, 2016, modifying Attachment H-20A and H-20B of the PJM OATT • FERC issued an Order March 10, 2017, accepting (subject to refund) those modifications • AEP calculated its Projected Transmission Revenue Requirement (PTRR) for rates effective
Slide 24: TransCo Rates
TransCo Rates • Previous “Billed” Rate – Rates effective July 1, 2016 • billed July – December, 2016 • $39.91/MW-Day (2015 NSPL 24,725.1 MW) • Projected Rate update (PTRR) – Rates effective January 1, 2017 with Average B/E “Projected” Ratebase Balances (2016-2017) and O&M “Projected” 2017 Expense •
Slide 25: AEP.com Website Posting
AEP.com Website Posting for TransCo Rates Effective January - December, 2017 • Notice of Annual Filing • Formula Rate Update AEP Transmission Companies Summary • http://www.aep.com/about/codeofconduct/ • ATRR Summary of AEP TransCo East OASIS/TariffFilings/ Formula Rates • Appalachian Transmission C
Slide 26: TransCo Rate Summary
TransCo Rate Summary Charge July 1, 2016 * Projected ** Total Change 2015 FERC Form 1 January 1, 2017 and % Change (projected plant 2016) (projected B/E plant) Point-to Point Rate $504.95 $/MW-Month $1,213.79 $1,718.74 41.6% Schedule 12 $27,198,984 $124,875,434 $152,074,418 21.8% AEP East Zone (2,24
Slide 27: Primary Drivers of Rate Change
Primary Drivers of Rate Change • Increased capital spend in AEP I&M TransCo, AEP Kentucky TransCo, AEP Ohio TransCo and AEP West Virginia TransCo • Increase in Expense • Increase in O&M Expense • Increase in Depreciation Expense • Increase in Property Taxes • Network Service Peak Load (“NSPL”) • 9.1
Slide 28: Revenue Requirement (Summary Line 8)
Revenue Requirement (Summary Line 8) used to calculate the PTRR Revenue Requirement $500 $450 $400 $350 In Millions $300 $250 $200 $150 $100 $50 $0 Appalachian Kentucky West Virginia Total East IM Transco Ohio Transco Transco Transco Transco Transco's 2012 Projected $111,736 $2,132,036 $146,026 $26,
Slide 29: Gross Plant Investment
Gross Plant Investment Prior Year Projected vs. PTRR B/E Balance $4,000 $3,500 $3,000 In Millions $2,500 $2,000 $1,500 $1,000 $500 $0 Appalachian Kentucky West Virginia Total East IM Transco Ohio Transco Transco Transco Transco TransCo's 2012 Projected ‐ 21,881,262 ‐ 244,322,471 ‐ $266,203,733 2013
Slide 30: Transmission O&M Expense
Transmission O&M Expense 2016 Projected (Actual 2015) vs 2017 Projected $50 $45 $40 $35 In Millions $30 $25 $20 $15 $10 $5 $0 Total East APTCo IMTCo KTCo OHTCo WVTCo TransCo's 2016 Projected 147 3,645,714 112,315 7,761,650 1,972,225 13,492,051 2017 Projected 998 11,882,535 977,590 24,133,108 7,828,9
Slide 31: Projected Plant Additions
Projected Plant Additions $1,200 $1,000 $800 In Millions $600 $400 $200 $0 Appalachian Kentucky W Virginia Total East IM Transco Ohio Transco Transco Transco Transco Transco's 2011 Projected ‐ 3,128,014 ‐ 74,770,454 ‐ 77,898,468 2012 Projected ‐ 18,325,850 ‐ 170,448,460 ‐ 188,774,310 2013 Projected
Slide 32: Reliability Enhancement “Backbone Project”
Reliability Enhancement “Backbone Project” b1465.1 - Add a third 2250 MVA 765/345 kV transformer at Sullivan station and 345 kV switching changes at Sullivan/Breed Driver: Baseline Load Growth Deliverability & Reliability 32
Slide 33: Reliability Enhancement “Baseline Project”
Reliability Enhancement “Baseline Project” • B1818 - Expand the Allen station, install a second 345/138 kV transformer, add four 138 kV exits, cutting in the Lincoln - Sterling and Milan - Timber Switch 138 kV double circuit tower line • b2423 - Install a 300 MVAR shunt reactor at AEP's Wyoming 765
Slide 34: AEP Projects Website
AEP Projects Website • A valuable resource for Transmission project information around the system: – http://aeptransmission.com/index.php – Current Projects by state (not all inclusive) • Project specific websites 34
Slide 35: Questions
Questions Contact: Diane Keegan Formula Rates Manager 614-716-2317 dmkeegan@aep.com 35
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