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Why American Electric Power's Stock Is Tumbling Today

By Matthew DiLallo – Jul 27, 2020 at 11:12AM

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The utility is getting caught up in Ohio's bribery scandal.

What happened

Shares of American Electric Power (AEP -2.94%) fell as much as 10% in early morning trading on Monday, though the stock did recover some of those losses and was only down about 7% by 11:45 a.m. EDT. Weighing on the utility stock was a report in the Columbus Dispatch that a non-profit wholly supported by the company contributed money to campaigns tied to the passage of Ohio's House Bill 6. 

So what

Last week, FBI agents arrested Ohio's House Speaker Larry Householder and four others as part of an alleged scheme to have taxpayers in the state bail out two troubled nuclear power plants formerly owned by FirstEnergy (FE -0.48%). That news rocked shares of that utility, which tumbled last week. 

A power generating station at night.

Image source: Getty Images.

Over the weekend, the Columbus Dispatch reported that AEP also contributed to campaigns that supported the passage of that bailout bill, HB6. According to the report, Empowering Ohio's Economy, a non-profit wholly funded by AEP, gave $150,000 to Generation Now. That group also received $60 million in funding from FirstEnergy-related groups to support the passage of HB6. AEP also reportedly gave $200,000 to a group related to a political action committee that spent $1 million in the 2018 campaigns of Republican candidates favored by Householder to help ensure favorable votes on the bill's passage. 

Now what

AEP was one of the beneficiaries of HB6's passage, which included a more than six-year extension of a monthly surcharge. According to the Columbus Dispatch, the fees, which add up to $50 million a year, help subsidize two old coal-fired power plants it owns in a partnership with other utilities. Thus, the company will lose some revenue if Ohio repeals the bill, a move the governor supports. 

Investigators haven't contacted AEP yet regarding the criminal probe tied to HB6, according to comments by a company spokesperson to the Columbus Dispatch. However, that doesn't mean they won't contact the company in the future. That uncertainty, as well as others relating to AEP's potential involvement in the case, is weighing on its stock and could continue doing so until the company cleared of any wrongdoing.

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

American Electric Power Company, Inc. Stock Quote
American Electric Power Company, Inc.
AEP
$86.45 (-2.94%) $-2.62
FirstEnergy Corp. Stock Quote
FirstEnergy Corp.
FE
$37.00 (-0.48%) $0.18

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