This business segment includes subsidiaries that have nonutility generating assets, a wholesale energy trading and marketing business, barge operations, and a retail supply and energy management unit. The generation and marketing subsidiaries of AEP are impacted by electricity and fuel prices, new market entrants, construction or retirement of generating assets by others, and technological advances in power generation. Our ability to maintain relatively low-cost, efficient and reliable operations is critical to our competitiveness.
- AEP Generation Resources – This is the largest subsidiary of our competitive businesses. AEP Generation Resources (AGR) is a public utility that owns 10,002 megawatts (MW) of generating capacity with rights to an additional 1,186 MW. AEP completed the separation of its Ohio generating assets from its Ohio distribution and transmission operations, and it transferred most of AEP Ohio’s generating assets to a new competitive affiliate, AGR, as of Dec. 31, 2013. AGR now manages most of AEP Ohio’s former generating assets in the competitive generation market. The initial capitalization was approximately $3 billion, with roughly two-thirds representing equity and the remainder debt.
AEP Energy – This is our retail supply and energy management business. AEP Energy is a retail electricity provider that supplies electricity and related services to residential, commercial and industrial customers. AEP Energy has approximately 215,000 retail customers in Ohio, Illinois, Pennsylvania, New Jersey and Maryland and is licensed to operate in several other states. AEP Energy’s challenge, in a very competitive marketplace characterized by low energy prices, is to be profitable and to grow at a rate that delivers superior financial returns in exchange for the associated risk.
- AEP Energy Partners – This is our wholesale energy trading and marketing business. AEP Energy Partners enters into short- and long-term transactions to buy or sell capacity, energy and other services. It operates primarily in the ERCOT, the MISO and PJM Interconnection. AEP Energy Partners sells power into the market and engages in power, natural gas, coal and emissions allowances, risk management and trading activities.
AEP River Operations – This business unit transports liquid, coal and dry bulk commodities primarily on the Ohio, Illinois and lower Mississippi rivers. AEP River Operations, one of the largest inland waterways carriers, transported 29 million tons of coal and other consumables to AEP facilities and 37 million tons of coal, grain and other bulk goods for other commercial customers in 2013. Coal represented 56 percent of tons hauled in 2013, followed by agriculture (22 percent) and steel (12 percent). Total tonnage decreased by more than 8 million tons compared with 2012, primarily due to fewer U.S. coal exports and the lingering effects of the 2012 drought.
We own or lease approximately 3,000 barges, 60 towboats and 25 harbor boats. In 2014, we will add at least 20 10,000-barrel tank barges as we enter the tank barge transport business. This will allow us to serve both current and new customers that transport liquid commodities. The timing correlates with the recent significant growth of barge transportation of oil and gas products.
Transporting liquids, such as petroleum products and chemicals, brings some new risk and additional regulations that must be followed. The liquids market can also produce a greater financial return; we estimate a barge moving liquids can generate up to five times higher return than a barge hauling dry cargo. River Operations’ strong safety and environmental record also should help the organization succeed in the liquids market. One of the greatest risks associated with this business line is the state of disrepair of the nation’s locks and dams on its inland waterways.