AEP reaches settlement on transmission ROE for eastern companies
American Electric Power has reached a settlement agreement related to the return on equity for transmission investments in AEP's eastern operating companies and transmission companies. These include entities in Indiana, Kentucky, Michigan, Ohio, Virginia and West Virginia. The settlement was filed with the Federal Energy Regulatory Commission March 28. If approved by FERC, the agreement sets a base ROE of 9.85% for a total ROE of 10.35%including an adder AEP receives as a Regional Transmission Organization member, effective Jan. 1, 2018. AEP's previous base ROE was 10.99%. The cap on equity for AEP's eastern transmission projects will be 55%. AEP also will make a one-time refund of $50M to transmission customers for periods prior to 2018 that will be credited in second-quarter 2018. As part of the settlement, AEP filed updated transmission formula rates that incorporate the benefits of tax reform for transmission customers. FERC approved these new rates on an interim basis April 4. The tax benefits total approximately $163M for 2018. Formula rates allow the benefits of tax reform to flow through to customers in a timely manner.