AEP Texas is buying land in South McAllen, but its plan to reduce power outages might stir up a fight

Now that American Electric Power Texas is investing in its electric grid infrastructure, the company is seeking to purchase land in key locations across McAllen. 

The goal is to reduce the frequency of power outages and improve the resiliency of its network. The Corpus Christi-based company is already a significant landowner in Hidalgo County, with over one hundred lots in its portfolio, according to the Hidalgo County Appraisal District, as analyzed by the Rio Grande Valley Business Journal. 

That’s because AEP Texas is an electric transmission company, a regulated utility provider that owns, operates, and maintains electric substations, which are connected to high-voltage power lines across its network, including the Rio Grande Valley. 

The appraised value of real estate owned by AEP Texas in Hidalgo County is more than $35 million across 103 lots, appraisal district records show. When personal property, or the value of its physical infrastructure, is included, AEP Texas was the largest taxpayer in Hidalgo County in 2024. The taxable value of its holdings was $607 million in Hidalgo County last year, according to the annual appraisal district report. 

But there’s a balancing act for AEP Texas to buy more land: neighborhoods are often resistant to zoning changes, which would enable the company to build industrial electric substations. But those same communities are contributing to record-breaking electricity demand as more subdivisions and retail plazas to serve their daily needs are built. 

The best land is too expensive

Not only that, but AEP needs affordable land because its investment costs are passed through to its customers, plus it’s competing with commercial development land values. 

“Some of these property owners want to sell us the entire property, [but] all we want is a little parcel, and we have to answer to our ratepayers. So how do you justify purchasing all this acreage when all you need is four to five [acres],” said Daniel Lucio, spokesperson for AEP Texas, during an August McAllen commission meeting. 

AEP already operates eight substations across McAllen. It failed to build its ninth, so it’s looking for another plot of land in North McAllen, too.

The exact locations of the proposed substations in South McAllen are not public record yet. But the company expects to purchase properties for substations in districts 4 and 2. 

“These substations are strategically located for a reason. The circuits that branch out from these substations perform best when they are shorter,” Lucio said. “It’s not uncommon for us to build these substations near residential neighborhoods.” 

After AEP Texas failed to secure a zoning variance for a proposed North McAllen electric substation near Buddy Owens Boulevard and North Bentsen Road, city leaders offered to help with real estate development and community relations. 

McAllen offers help to AEP Texas

AEP Texas is collaborating with the City of McAllen planning department and city commissioners to find suitable real estate close enough to growing subdivisions to meet its needs that fit within the zoning code. 

McAllen city manager Isaac Tawil invited AEP Texas to do a workshop for residents to offer more information about electric substations for the next time such a facility will be presented to a community. 

“AEP is working with the development center staff to consider options, look for other parcels that they may be able to put a substation on,” Tawil said in a recent interview. “We want to make sure that our residents, the industry…retail, have the resources that it needs to thrive. The city is supportive of AEP’s efforts to expand its ability to provide reliable energy to the Valley.” 

By 2030, AEP Texas expects to extend the largest high-voltage transmission lines, which can carry 765 kilovolts of power into the Rio Grande Valley. That level of transmission line doesn’t even exist in Texas yet, as most high-voltage lines are no more powerful than 345 kilovolts. 

But AEP has permission to start building the 765 kilovolt line in San Antonio first, then will invest in such infrastructure in deeper South Texas later. That’s the next big project that will require even more right-of-way easements across private property. 

The electricity demand conundrum

Unlike other utilities such as water, which can be easily stored for later use, electricity is often produced in response to demand because there’s not widespread use of industrial-scale battery storage on the Texas electric grid. 

Think of the situation like the balancing act of the local bakery or panaderia. If the bakery produces too many conchas – a Mexican sweet bread popular as a breakfast item – in the morning and they’re not sold fast enough, the food will go to waste by the evening. But if it doesn’t prepare enough, then some customers might be turned away empty-handed. 

But the electricity demand issue in the Rio Grande Valley is more like a cooking barbacoa, or slow-cooked meat, and less akin to a sweet bread in terms of how much time it takes to produce and transfer the electricity. 

The grid operates on demand, when the lights are switched on or the appliances are connected. 

Once the barbacoa is sold out for the day, or the electricity demand peaks, if there’s not enough generation on the grid or the ability to move electricity across the state easily with large high-voltage power lines, then there’s not much that can be done in the moment to reduce power outages. 

And neither energy companies nor their consumers like blackouts.