AMP, Ratepayer Advocates Oppose ROE, Rates Proposed for $1.1B AEP-FirstEnergy Transmission Project

Why It Matters

The outcome will shape how utilities price large transmission upgrades and could lock ratepayers into higher costs or set a benchmark for future equity returns in the sector.

Key Takeaways

• $1.1B Ohio transmission project funded 60% by ratepayers.
• Grid Growth seeks 10.8% return on equity, deemed excessive.
• AMP and advocates claim risk incentives unfairly shift costs.
• FERC decision could set precedent for utility rate formulas.
• Data center demand drives new high‑voltage transmission lines.

Pulse Analysis

The PJM Interconnection’s latest regional transmission expansion plan reflects a surge in data‑center construction across the Midwest and Mid‑Atlantic, prompting utilities to build 765‑kV and 345‑kV lines to sustain grid reliability. While the $1.1 billion project promises to alleviate congestion and support economic growth, its financing model places a substantial burden on Ohio ratepayers, who are slated to cover roughly 60% of the cost. This dynamic underscores a broader trend where high‑performance computing hubs are reshaping traditional utility planning, demanding faster, higher‑capacity infrastructure that often exceeds the scope of legacy rate‑setting frameworks.

At the heart of the dispute is Grid Growth Ohio’s request for a 10.8% return on equity (ROE) coupled with a suite of incentives—including construction‑in‑progress and project‑abandonment credits—that opponents argue constitute an impermissible transfer of risk to consumers. American Municipal Power, the Ohio Consumers’ Counsel, and Maryland’s Office of People’s Counsel contend that the proposed ROE exceeds FERC’s preferred methodology and that the venture’s parent companies, AEP and Evergy, mitigate any genuine start‑up risk. If FERC upholds the filing, it could legitimize a higher‑risk premium for future transmission projects, potentially inflating utility earnings at the expense of ratepayers.

The decision will reverberate beyond Ohio, setting a precedent for how regulators balance the need for rapid grid upgrades against consumer protection. A rejection or delayed implementation could force utilities to seek alternative financing structures, such as higher debt ratios or reduced incentive packages, thereby lowering the cost passed to customers. Conversely, approval may encourage other new‑entrant transmission entities to pursue similar rate formulas, accelerating infrastructure deployment but also raising scrutiny over equity returns and risk allocation in the evolving energy landscape.