AEP expands spending plan as it doubles data center electricity demand deals

By Laila Kearney and Vallari Srivastava

Feb 12 (Reuters) - American Electric Power AEP.O is expanding its five-year capital expenditure plan beyond $72 billion as the major U.S. electric utility doubles its signed power deals with data centers, executives with the company said on Thursday.

U.S. electricity demand is rising at an unprecedented pace, with utilities ramping up investments to address growing demand for power capacity from Big Tech as they set up data centers to support complex AI-related tasks.

AEP says 80% of its growth is driven by large hyperscalers including Alphabet's GOOGL.O Google, Amazon.com AMZN.O and Meta META.O.

AEP's shares surged to a record high and were last up 3.4% in morning trade at $127.38 a share.

AEP said it now has 56 gigawatts in agreements to supply power to data centers, a doubling since October, with an additional 180 gigawatts requested by data centers.

While not all of that demand is expected to materialize, that combined capacity is enough to power all of the homes in the U.S.

As demand rises, the company said it has identified $5 billion to $8 billion in additional transmission and generation projects beyond its current $72 billion capital investment plan.

While utilities beef up spending on power plants, cables and other electrical infrastructure to meet rising demand, concerns are growing about rising customer power bills.

"Through federal loans, state grants, innovative rate designs and direct bill assistance, we are working to limit bill impacts while continuing to invest in the system," AEP CEO Bill Fehrman said.

"While this is good progress, additional measures must be taken to ensure that the infrastructure required to serve large loads is paid for by the customers who drive those needs," Fehrman said.

AEP said it would partner with ERCOT, an independent system operator in Texas, to build the necessary transmission and distribution infrastructure and "bring these large loads online in a timely manner and within the regulatory construct".

The Ohio-based company posted operating earnings of $1.19 per share for the three months ended December 31, compared with analysts' average estimate of $1.15 per share, according to data compiled by LSEG.