AEP to Heed Wants of State Leaders, Putting Climate Aim in Flux

(Bloomberg) -- American Electric Power Co. is taking direction from state regulators on their energy and economic development goals under new CEO Bill Fehrman. That may lead to a change in the utility’s 2045 net-zero carbon target, he said.

“When 10 of our 11 states are red states, to go into those states and tell them we want to discontinue burning coal and natural gas because AEP has a carbon target, that isn’t well-received,” said Fehrman, who became chief executive in August. 

“It’s the state’s responsibility to decide what their policy’s going to be,” he said during an interview at the EEI Financial Conference in Florida. “And we’ll meet that policy.”

Utilities have begun rethinking climate goals that have faced challenges as power demand rises for the first time in decades thanks to data centers, new factories and the electrification of everything from vehicles to home heating. Duke Energy Corp. said in April that the demand spike complicates plans to cut carbon emissions, while FirstEnergy Corp. announced in February it was abandoning a 2030 target for slashing greenhouse gas pollution. 

AEP has long had a difficult time with regulators, including rejections of both a $1.5 billion sale of Kentucky operations and plans to spend $2.2 billion on green-energy assets in Texas. Utility veteran Fehrman is focused on mending those relationships by listening closely to regulators, improving reliability and lowering customer bills. 

In the past, AEP operated under a top-down model where it would make decisions and then go to its states to tell them what it was planning, Fehrman said. 

“I’m just the opposite,” he added. “I’ll start with the states and figure out what the states want to do and how do they want to do it, and then we’ll execute it.”

Fehrman emphasized that the climate target is just one piece of numerous priorities important to regulators, lawmakers and customers. He’s already visited seven of the states where AEP operates and heard from regulators in West Virginia and Kentucky who told him their top priorities are economic development and jobs. 

AEP is one of the biggest power companies in the US and sells electricity to nearly 5.5 million customers in Arkansas, Indiana, Kentucky, Louisiana, Michigan, Ohio, Oklahoma, Tennessee, Texas, Virginia and West Virginia. Ferhman also said he’s simplified the company’s hierarchy so directors of money-making divisions report directly to him and the leaders of operating companies have more authority to make their own decisions. 

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