Proposed federal rules regulating carbon emissions are "not credible" and threaten to make the electricity system less reliable, according to American Electric Power's top executive.
Proposed federal rules regulating carbon emissions are “not credible” and threaten to make the electricity system less reliable, according to American Electric Power’s top executive.
The Columbus-based utility posted an increase in profit and sales for the second quarter but faces uncertainty as the states decide how to implement the pollution rules.
“The current plan is much too aggressive in many states,” said Nick Akins, the chairman, president and CEO, speaking yesterday in a conference call with analysts.
AEP serves an 11-state territory. Each state has different benchmarks to meet in the U.S. Environmental Protection Agency plan.
To meet the goals, many states will need to increase their reliance on natural gas to generate electricity and reduce use of coal-fired power. That will take more time than is available under the proposal as it stands, Akins said.
“The idea of natural-gas generation to run at 70 percent capacity factor, when neither the plants, natural-gas-pipeline system or the electric system is in place to support it, is not credible,” he said.
States would need to submit compliance plans by mid-2016 and implement the plans by 2017. If multiple states want to submit joint plans, they would have until 2018.
The government announced the rules last month and is now taking comments and considering changes. The goal is to reduce carbon emissions by
30 percent by 2030.
AEP has joined with other large electricity utilities and industry groups to ask for more time and warn of rate increases and other negative consequences that could arise from the plan.
Environmental groups say the rules were a long time coming.
“The proposed regulations are not a surprise and shouldn’t be a surprise,” said Trish Demeter, managing director of energy and clean-air programs for the Ohio Environmental Council.
The utilities have had time to prepare for these “completely achievable” rules, she said.
While Akins was concerned about the new regulations, he said he was pleased with his company’s second-quarter performance. AEP had profit of $390 million, up from $338 million in the same period a year ago, and sales of $4 billion, up from $3.6 billion.
Much of the increase has come from a series of interstate power-line projects.
Akins also pointed to overall growing electricity demand from industrial customers.
However, industrial demand was actually down 0.5 percent from the previous second quarter, with the decrease largely attributable to Ormet Corp. The Ohio aluminum smelter, which was AEP’s largest customer, went out of business in October.
Excluding Ormet, AEP’s industrial demand was up 4.5 percent for the quarter, a substantial gain, and one that reflects the economic health of the companies still operating, AEP executives have said.
AEP’s financial performance exceeded analysts’ expectations. Despite that, the company’s shares closed down 1.5 percent yesterday, part of an overall decline on Wall Street.
@dispatchenergyEARNINGS AEP Second quarter 2014 2013 Revenue $4 billion $3.6 billion Net income $390 million $338 million Earnings per share 80 cents 69 cents Year-to-date 2014 2013 Revenue $8.7 billion $7.4 billion Net income $950 million $701 million Earnings per share $1.95 $1.44 Source: company reports