US utility threatens to quit power grids on data center rift

(Bloomberg) — American Electric Power Co., one of the largest US utilities, is threatening to remove itself from two of the country’s biggest electricity grids over the length of time it takes to connect new AI data centers.

“We have to solve the speed to market issue,” Chief Executive Officer Bill Fehrman said in a Tuesday earnings call. “This is an area that clearly has to get fixed.”

AEP is in the early stages of evaluating membership in PJM Interconnection LLC, the largest regional grid in the US, as well as Southwest Power Pool Inc., Fehrman said. The move comes as the Ohio-based utility giant seeks to meet booming demand from power-hungry data centers.

PJM operates a regional power grid that serves more than 67 million people in 13 eastern states, extending from Illinois to North Carolina. SPP’s grid serves about 20 million people in central US from North Dakota to part of Texas.

Frustrations over PJM have been growing because wholesale electricity costs are climbing while reforms are moving too slowly to both bring on new supplies and serve increasing demand by artificial intelligence. Problems that have been festering for years for connecting and procuring supplies have now become urgent because data centers are expected to expand electricity consumption at a record clip following two decades with little growth.

“AEP is expressing frustration with the time to connect new generation in PJM,” said Paul Patterson, a utility analyst for Glenrock Associates. “It sounds like their patience has been tried by the perception that PJM and others are not moving as fast enough as utilities would like.”

AEP stock rose 1.8% in New York, extending the year-to-date gain to 19%. Earlier Tuesday, the company said it was boosting its five-year capital plan by 8.3% to $78 billion and was eyeing a further $10 billion in investment opportunities, including SoftBank Group Corp.’s data center project in Piketon, Ohio.

Fehrman didn’t disclose a timeline for the membership review, but said the current state of PJM’s performance and stakeholder approval process doesn’t give him great confidence that the issues will be resolved any time soon.

“In fact, if something is not done now, I expect we could still be having these same conversations in 10 years,” he said on the call.