Benjamin G.S. Fowke, III
Interim Chief Executive Officer and President at American Electric Power
Well, good morning and welcome to American Electric Power's first quarter 2024 earnings call. Shortly, Peggy will give a regulatory update, followed by Chuck, who will provide more detailed financial review.
A summary of our first quarter 2024 business highlights can be found on slide six of today's presentation. Beginning with AEP's financial results. Today we announced first quarter 2024 operating earnings of a $1.27 per share, a $0.16 increase over one year ago. We were also reaffirming AEP's 2024 full year operating earnings guidance of $5.53 to $5.73 and long-term earnings growth rate of 6% to 7%, I'm pleased to note we achieved a 14.2% FFO to debt ratio this quarter, which is within our stated range.
Let me assure you that AEP's direction and strategy remain on track as this team is fully engaged, energized, and working well together to enhance the customer experience and investor value. I've reviewed AEP's financial targets and I have total confidence in the plan's achievability. It's hard to believe it's been just two months since I stepped into the role of Interim CEO, and it has been a busy and productive 60 days. I've had the opportunity to meet with many different stakeholders, including elected officials, regulators, community leaders, customers, investors, and of course, the team right here at AEP. All of these meetings have been very useful in helping shape the initiatives I will discuss shortly.
Before I dive into other business, I want to give you a brief update on the search for a permanent CEO. The process is well underway, and I am certain, based on the talent pool, that we're looking at that we will find the right person to lead AEP. As I mentioned when we first talked at the end of February, the search will probably take between six to 12 months. We will take the time necessary to find the best candidate and we're committed to keeping you informed.
So across the AEP system, I see the need to increase capital spend in the future, including incremental investment related to commercial load growth from data centers and resiliency spend. Specific to load growth, the amount of service request is truly staggering and ranges between 10 gigawatts to 15 gigawatts of incremental load by the end of the decade, in addition to many, many more gigawatts from hundreds of inquiries. The key to capturing this commercial and industrial growth is to work with parties to make sure the commitments are real and secure, the tariffs and contracts are fair to all customers, and growth is self-funded. And, of course that the load can be met.
A couple of great examples of new commercial commitments can be evidenced by last week's announcements from both Amazon Web Services and Google to build large data centers in I&M's Northern Indiana service territory. At AEP, we have the largest transmission system in the United States with a high voltage backbone in the Midwest. We expect more transmission investment possibilities driven by this data center growth specifically in substations and customer connections. As a side note, I'd like to call attention to AEP's commercial load in the first quarter of 2024, which grew at 10.5% over the first quarter of last year. In addition, we will file our system resiliency plan in Texas no later than the third quarter of this year related to legislation passed in 2023, including investment related to hardening and modernizing the grid, expanding vegetation management, and, of course, wildfire mitigation.
Clearly a strong balance sheet is critical as we look to fund potential increased capital spend. And I believe incremental growth equity needed to fund smart capital is a positive thing. That said, we are open to equity alternatives to a portfolio optimization. Looking at opportunities where price meets execution while at the same time staying focused on our efforts to achieve constructive regulatory outcomes.
On a similar note, I now like to provide a brief update on the sales of our AEP Energy Retail and AEP OnSite distributed resources businesses. Both of which are included in the generation and marketing segment. We are working through final phases of the process and expect to conclude that process by our second quarter earnings call.
Now let's move on to last week's newly published federal EPA rules on greenhouse gas standards, coal combustion residuals or CCR, effluent limitation guidelines, or ELG. Although our team is still reviewing the rules, we will likely pursue legal challenges while working with others, including our states, who are aligned with AEP's commitment to provide customers with reliable and affordable energy. These new regulations in some cases require the use of unproven technologies, are extremely expensive, and establish unreasonable compliance schedules. We are at a time in our --- when our nation needs to add dispatchable generations to support grid reliability and growth. And these rules have the potential to not only prematurely accelerate plant closures, but also discourage new, dispatchable generation from being built.
Now turning to labor management. We announced a voluntary severance program earlier this month, taken effect July 1. We expect this initiative will save labor cost of approximately $100 million and will assist us in managing our cost to better serve our customers, allow us to redeploy resources locally in a regulated footprint. And finally mitigate impacts from inflationary pressures and interest rates. Of course we will do it so in a way that is fair and equitable to all of our valued employees.
So as I mentioned, it's been a busy and productive couple of months. Have confidence in our strategy and team, I'm excited about the opportunities ahead to drive growth and create value for our investors. We look forward to providing you even more positive updates as we move forward in the year, further solidifying stakeholder confidence in our financial targets.
Before we turn to Peggy for additional updates, know that I am aware of AEP's regulatory successes and some of our challenges, we continue to review plans to strengthen our regulatory compacts as we work through the past and are ready for the future. Peggy?
