AEP vs. NiSource Q3 2026: one capex story, one accounting story

American Electric Power and NiSource are both regulated US utilities: state commissions set the prices they charge, and their profits grow mainly by building plant that regulators then let them earn a return on. Both published third-quarter 2026 results on October 28, both posted strong headline EPS growth, and both quarters look better on paper than underneath. The difference is what is doing the flattering. At AEP it is a hot summer and a lower tax rate on top of sales growth that is clearly real. At NiSource it is a one-off Ohio property-tax settlement covering four years, and without it pretax income would have fallen.

The two quarters side by side

Operating margin is the share of revenue left after fuel, running costs and depreciation, before interest and income tax. Neither company buys back stock; both are issuing shares to fund construction, so EPS grew in spite of the share count.

What drove AEP

AEP's growth shows up in billed electricity. Retail kilowatt-hours rose 8.0% at its vertically integrated utilities and 13.6% at its Ohio and Texas wires businesses, with commercial sales, where data centers are billed, up 15–18%. Regulator-approved price increases added $261 million of retail revenue at the integrated utilities.

The flattering: the 10-Q credits $118 million of revenue to hotter weather, against a $200 million rise in pretax income (+17.9%). The tax rate fell to 9.5% from 12.4%, worth roughly $0.07 a share. Our AEP report puts underlying pretax growth somewhere between about 7% and the 18% reported, not at the 19% EPS headline.

What drove NiSource

NiSource's summer was not unusual: cooling degree days at NIPSCO were 639 against 640 a year ago, so weather explains little. Instead, Columbia's "other taxes" line fell to $8.4 million from $52.0 million, mostly a $43.0 million settlement with the Ohio Department of Taxation for tax years 2022 through 2025. That is why Columbia's operating income jumped to $119.2 million from $52.1 million.

Take the settlement out and, as our NiSource report works through, pretax income falls about 15% to roughly $109 million instead of rising 19%. The company's adjusted EPS does not remove it. NIPSCO, the Indiana electric and gas utility where the growth story sits, saw operating income fall 4.1% to $223.1 million even as industrial electric sales rose 11.8%, because depreciation, outside services and storm repairs grew faster than new rates. NiSource's lower tax rate also does less than it seems: much of it is passed back to customers through a $15.5 million revenue reduction.

Where they diverge

• Demand is real at both, but only AEP's is in the earnings yet. AEP's commercial sales growth fed through to a $119 million rise in integrated-utility earnings. NIPSCO's industrial volume growth was swallowed by costs.
• The flattering items differ in kind. Weather and tax credits recur in some form every year and can swing either way; a four-year tax settlement is a single catch-up that will not repeat.
• Both are betting on capital plans. AEP set a $100 billion 2027–2031 plan and raised its operating EPS growth target to 9–11% a year. NiSource set $40.0 billion for 2027–2033, including $8.0 billion for data centers such as its new 788 MW Microsoft contract (still awaiting Indiana approval), and targets 10–11% growth including data-center earnings.
• Both carry the same funding strain. Interest expense rose 19.1% at AEP and 17.1% at NiSource, well ahead of revenue at NiSource, and both are selling shares to pay for construction.

Which quarter was better?

Both earned a "flattered" verdict, but AEP's quarter was the higher quality. Strip out the weather and the tax rate and AEP still grew pretax income by somewhere around 7% or more on sales you can see in its kilowatt-hours. Strip out the Ohio settlement at NiSource and pretax income shrank, with its main utility earning less than a year ago. NiSource's quarter was about the plan, not the profit: the Microsoft contract and first 2027 guidance of $2.22–$2.30. The next test for each is the same: whether regulators let them earn close to their requested returns on the spending.