AEP, Exelon Plan Independent Transmission Subsidiaries

American Electric Power (AEP) and Exelon plan to make heavy investments in independent transmission subsidiaries to cash in on growth opportunities—and good-looking returns on their investments.

Many large utilities are in or are entering the transmission sector because new Smart Grid technologies as well as new transmission lines are necessary to integrate and move renewable energy sources such as wind and solar from their typically remote generation sites to major population centers. But both AEP and Exelon seem willing to spend the money and muscle on their entries into the field.

AEP Chairman Michael Morris said earlier this week that the company expects to spend $130 million in the new company next year and later could grow its investment to $400 million per year over the next seven years. In comments he made during the Edison Electric Institute conference, Morris said that after the independent company is approved by regulators, AEP will be able to earn a faster regulatory return on their investments.

AEP had earlier established two transmission joint ventures with Berkshire Hathaway's MidAmerican Energy Holdings. One of those ventures, Electric Transmission Texas, has had $800 million allocated for projects that are part of a $5 billion expansion operation to take wind power from its sources in West Texas to the more heavily populated eastern section of the state. The second venture, Electric Transmission America, will concentrate its efforts in more central locations in the country.  AEP operates eight utilities and the Columbus-based company owns the country's largest transmission system.

Exelon, which began working on its new transmission plans earlier this year, will partner with and invest in shovel-ready projects with other utilities as well as high-voltage transmission construction projects in its service area. Those partnerships will include working with its utilities and area developers. Chicago-based Exelon provides service to 5.4 million customers in Illinois and Pennsylvania and is considered one of the largest electric and gas utilities in the country.

Exelon officials have said transmission investment could reach between $60 billion to $100 billion in the U.S. within the next 10 years.

   Quick Take: Looking two years out, we foresee boom times for transmission-savvy construction firms. And for makers of control center and market making software. More transmission means more bulk sales. And the installation of another 800 synchrophasors to monitor the transmission grid—as recently approved in a stimulus grant—will drive upgrades and improvements to control rooms as well.

   AEP transmission plans  by Reuters

   Exelon's transmission sector entry  on WSJ