AEP Earnings Call a Block and Tackle Bunch of Bull

Ever listened to an investor owned utility's earnings call?  They're an acquired taste, because your first one sounds like complete and utter gibberish.  Are these people speaking English?  Is there some fancy 1% business speak language that they didn't teach you in school?  Nope.  I think company management just plain ol' makes crap up to keep the investment analysts guessing.

Case in point -- Nick Akins and his "block and tackle spending." 

And then, when you look at the other capital that we're spending, it's block and tackle spending that typically is recovered from a regulated standpoint.

Blink.  Blink.  What?  Just for shits and giggles I plugged "block and tackle spending" into google.  I got a wikipedia description of block and tackle that describes it thus:  "...a system of two or more pulleys with a rope or cable threaded between them, usually used to lift or pull heavy loads," and a whole bunch of boating websites.  So, Nick is going to rig up some contraption that spends money using a system of pulleys and rope?  Sounds complicated.  I guess that's why they pay him the big bucks!

Anyhow... once you realize that the emperor has no clothes and that these corporate elitists are really not speaking in some special language, like pig latin, that your plebeian self doesn't understand, earnings calls are quite entertaining.  AEP's 4Q 2013 call on Monday was no exception.

AEP's CFO finally gets around to admitting that energy efficiency has flattened out residential demand growth and it's not expected to recover.

Residential sales, shown in the upper left quadrant, were up 0.9% for the quarter, which brings the annual sales flat to 2012. We continue to see modest customer growth in our Western service areas, while our East customer accounts were essentially flat. Average usage per customer has been impacted by home energy efficiency programs. For these reasons, we are expecting normalized residential sales to be down nearly 1% in 2014.

Too bad he's arriving late for the party.  How much do they pay this guy to make these brilliant conclusions?

AEP also got some apt questions about its planned "transmission spend," such as what it's going to take to make AEP fall out of love with transmission as an investment vehicle... oh, say, maybe as a little section 206 complaint or two:

Michael J. Lapides - Goldman Sachs Group Inc., Research Division
Yes, 2 questions unrelated. First, on the transmission side. We've seen in the MISO and in New England dockets where interveners are seeking lower transmission base ROEs. If same things happens in some of -- whether it's the Southwest Power Pool, whether it's in PJM, how -- what do you think that tipping point is where we change or, I don't know, you're incentive or your desire to be a sizable investor in transmission in the U.S.?

Nicholas K. Akins - Chairman, Chief Executive Officer, President, Member of Executive Committee and Member of Policy Committee
I think, as long as transmission is, at a premium or equal to the state rates, we're in good shape. And I think, clearly, there is an incentive being placed on building transmission. We're happy with that. And if -- really, once again, the FERC needs to send some messages here that from a policy perspective that we want to continue building transmission in this country. And as long as that premium is at or above the state rates, then we're in good shape.

Brian X. Tierney - Chief Financial Officer and Executive Vice President
FERC was clearly, Michael, looking to attract a capital into this space. And what they've done with their ROEs has done exactly what FERC wanted to happen. So as long as they, as Nick was saying, as long as they continue to send a signal that they want increased investment in this area, we'll respond to that signal.

Nicholas K. Akins - Chairman, Chief Executive Officer, President, Member of Executive Committee and Member of Policy Committee
Okay, I think it's good -- I think, it continues to be part and parcel to the overall grid expansion that's going on in the resilience of the grid. And there's going to continue to be spin regardless. The question is, do you really want to satisfy that precursor of transmission being build out to respond to the generation retirements and so forth to optimize the grid so that you can do that as a prerequisite and then focus on the rest of the underlying system. That's what key. I think you got to get through this transitional process we're at in this industry. So transmission needs to be incentivized in that regard because that will provide the greatest benefit in terms of resiliency of the grid, but also in terms of the optimization of the resources that are attached to the grid.

Blah, blah, blah, grid expansion, transmission build out, blah, blah, what could go wrong?

What about fierce, organized opposition to AEP's transmission plans?  The people have spoken and their action has seriously complicated or delayed many of AEP's transmission plans, in the past, currently, and in the future.  In fact, opposition is getting more organized and more knowledgeable.  And we're not going away.

AEP needs a new business plan.  Transmission is not the carefree investment vehicle Nick thinks it is...