➤ The newly enacted infrastructure law is a "step in the right direction," but more must be done on the legislative and regulatory fronts to achieve a clean energy economy, said Antonio Smyth, senior vice president of grid solutions for American Electric Power Co. Inc.

➤ AEP backs the tax credit extensions for wind and solar power and other technologies included in the proposed Build Back Better Act in Congress, as well as updates to the Federal Energy Regulatory Commission's transmission planning processes.

➤ Smyth also urged longer planning horizons and more detailed analyses of future power scenarios to support the clean energy transition.

American Electric Power Co., one of the largest public utilities in the U.S., has a goal to reduce its carbon dioxide emissions by 80% from 2000 levels by 2030 and produce net-zero emissions by 2050. AEP also operates the largest transmission system in North America, placing the company at the center of a clean energy transition that will require a massive buildout of new generation and grid infrastructure.

S&P Global Market Intelligence spoke with AEP Senior Vice President of Grid Solutions Antonio Smyth about the policies that can help the utility reach its emissions goals and the company's hopes for major climate legislation working its way through Congress. The following transcript is edited for length and clarity.

S&P Global Market Intelligence: U.S. President Joe Biden recently signed a large infrastructure bill that included some significant power-related provisions. What does AEP think of that law?

Antonio Smyth: Overall, we saw that [bill] as a step in the right direction, but far more needs to be accomplished on both the legislative and regulatory fronts to really move to a clean energy economy in a way that's appropriately aggressive from a timeframe perspective and adequately balances decarbonization goals, system reliability and resiliency, and customer affordability. [But] I really liked seeing initiatives [in the bill] around grid infrastructure and reliability, electrification development and enhancement of new technologies, and broadband as well.

AEP owns the largest transmission system in North America, which you said totals about 40,000 line miles. The new infrastructure law allows the Federal Energy Regulatory Commission to override states that deny approval for certain transmission projects or have not decided whether to approve them. What do you think of that policy?

I think it can be useful if it's done in a way that bridges the gap between federal and state views here. I think the jury is still out on whether that can be accomplished or not.

States have a very prominent role to play here because no one knows the area like the states. But it's sometimes hard for states to see more broadly and view the electric system more broadly from a benefits and a cost perspective. So you have to put those two things together in some form or fashion and drive to the right answer here. But this one is going to be a very, very difficult piece of policy to manage in the future.

The infrastructure bill contained other grid and transmission-focused provisions, including a $2.5 billion revolving loan fund that lets the government be an anchor tenant in new transmission projects. How do you see these provisions affecting AEP?

The $2.5 billion [program] probably isn't related a whole lot to the core businesses that we participate in. That's more of an anchor tenant, private investment.

There are some very good initiatives on the cybersecurity front, be it the initiatives related to enhancing grid security through public-private partnerships or the directive to FERC to initiate a rulemaking to develop incentives that encourage investments in cyber technology. We're very supportive of those things. But again, when it comes to the development of large-scale infrastructure and putting a meaningful push behind it, we need to see more ... both on the policy front and the regulation front.

What more would you like to see?

So in the Build Back Better Act, there were many provisions that would have had a significant and positive impact on the further investment in a clean and efficient power system. We continue to see value in a long-term extension of the production tax credit and the investment tax credits for wind and solar. The reestablishment of a production tax credit option for solar investments — that's actually very important to regulated utilities in particular. [We also like the] energy storage investment tax credits, the nuclear production tax credit, direct payment for clean energy tax credits.

I know Build Back Better is on the back burner, but these provisions in particular are pretty important, and we would like to see these items or similar items advanced, maybe in a separate piece of legislation or what have you going forward.

The version of the Build Back Better bill that passed the U.S. House of Representatives included a corporate alternative minimum tax, which many large companies opposed. Is that proposal still in the mix as Senate Democrats seek a path forward for the legislation?

We were in that camp and remain in that camp of not supporting the corporate alternative minimum tax. ... In the end, regulated utilities pass taxes through to electric ratepayers. And so you're, in effect, increasing the burden on electric ratepayers when that occurs.

What is AEP's strategy for trying to get momentum on the climate and energy provisions of Build Back Better, even if a broader package falls apart?

We're going to continue to advance our goals and priorities here on the policy front — the four or five [tax-related priorities] that we talked about. Regulation plays a part in this, too. FERC can play a big part here. They initiated in July [2021] an advanced notice of proposed rulemaking to really open a broad inquiry into potential [transmission] reforms. The outcome of that ruling has the potential to affect large-scale changes across the electric generation and transmission sectors throughout the country.

What would be AEP's ideal outcome from the FERC transmission proceeding?

We would really like to see regional transmission planning reform that resulted in better, higher degrees of interconnectivity between the regions. They're almost planned as separate grids, and we'd like to see more interconnectivity between the systems. We think that's really important, especially as we transition to more and more variable generation resources like renewables. The last thing we want to do is overbuild generation in regions when the answer might be more transmission.

We've offered some potential ideas around reform there that could be helpful to the commission — it's really around planning the system and doing it the right way that's forward-thinking, allocating the costs [of transmission] in a manner where beneficiaries and payers are closely aligned, and then ensuring that we've got a generator interconnection process that makes good sense and is fair to both generators and the customers that they will ultimately serve.

What else do you think policymakers and regulators must do to help this clean energy transition?

I think FERC is appropriately focused on transmission planning now ... so we're really pleased to see that happening. If we can look at planning horizons over a longer period of time or if we can expand and review multiple future scenarios and the transmission planning process, just given the fact that there's increased uncertainty related to system impacts by generation retirements and electrification and extreme weather and all those good things. We'd like to see some changes there. And really, the regular updating of planning analysis on a more regular cadence, I think, to keep up with these changes that are occurring at breakneck speeds now is going to be really important.