American Electric Power Co., Inc.
) unit AEP Ohio has filed a request with the Public Utilities
Commission of Ohio (PUCO) to expand its successful gridSMART
program. The company intends to facilitate the communities
throughout its Ohio service territory with this program.
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The customers in the gridSMART Demonstration Project get more
accurate information of their energy consumption, improved
billing accuracy and enhanced reliability. Moreover, the company
believes that modernization of the distribution grid would help
in locating damage more accurately and support faster restoration
times during storms like derecho and Sandy that occurred in 2012.
The gridSMART plan includes installing advanced metering
infrastructure ("AMI") benefiting approximately 900,000
customers, distribution of automation circuit reconfiguration
("DACR") to improve the reliability of 250 distribution circuits
to serve more than 330,000 customers and volt var optimization
("VVO") to control the voltage of 80 distribution circuits aiding
AMIs, also known as smart meters, are scheduled to be installed
in more than 31 communities throughout the service territory.
These smart meters provide customers with the requisite
information of how to use electricity more efficiently. With the
help of two-way communication capabilities, this technology
provides near real-time meter readings. These AMIs also provide
environmental benefit as the company does not have to send meter
readers out to a customer's home or business. The company expects
this to eliminate 187,000 metric tons of carbon dioxide by
reducing 440,000 miles driven on an annual basis.
Additionally, the company intends to install DACR devices. With
the help of remote monitoring, coordination and operation these
devices improve reliability of the distribution system.
Installation of VVO will help in achieving energy efficiency by
better controlling and monitoring the voltage levels on a
These installations if approved would require huge capital
expenditures. Therefore, the company plans to recover the costs
through a rider to customers' bills. With this increase, the
company expects that costs for an average residential customer
will be approximately $2.00 per month for the first five years.
American Electric Power's stable earnings base provides stability
to the revenue stream and insulates the company from adverse
regulatory decisions and the detrimental effects of lower sales
in a particular service area. Going forward, focus on
transmission expansion will allow the company to attain its 4%-6%
long-term EPS growth target along with an attractive dividend
However, tepid economies in a number of its service states and
its predominantly fossil fuel based generation assets may
restrict opportunities for future performance. Also, we are
concerned about the soft second quarter results that missed the
Zacks Consensus Estimate primarily due to declines in
residential, commercial and industrial sales. The company
presently retains a short-term Zacks Rank #3 (Hold).
Stocks that are worth considering in the space are
Brookfield Infrastructure Partners L.P.
Integrys Energy Group, Inc.
), all with a short-term Zacks Rank #2 (Buy).