UPDATE 1-AEP unit seeks $75 mln in DOE smart grid funds

* AEP Ohio applied for $75 mln in federal stimulus funds

* Funds will go toward $150 mln smart grid project

LOS ANGELES Aug 31 (Reuters) - U.S. power company American Electric Power Co Inc (AEP.N) said on Monday its Ohio unit applied for $75 million of federal stimulus funds to finance half of a project that aims to improve electricity distribution efficiency and cut energy consumption.

The $150 million gridSMART Demonstration Project will include the installation of 110,000 advanced electricity meters, new distribution grid technology, plug-in hybrid cars and consumer systems and products, including "smart appliances," to help customers in northeast central Ohio manage their electricity use.

The U.S. Department of Energy last month said it would begin awarding more than $4 billion in grants for the development of "smart grid" technologies by the end of September. The funding will support projects to update and increase the efficiency of the nation's electricity grid.

AEP's project will be deployed starting in 2010, the company said.

"Many in our sector are just installing smart meters, but our strategy goes beyond that," Joe Hamrock, president of AEP Ohio, said in a statement. "We will give customers the tools and information needed to use electricity more efficiently while improving the efficiency of how we deliver electricity to our customers."

AEP Ohio said the project could potentially reduce energy consumption by 18,000 megawatt-hours (MWH) peak demand by 15 megawatts and consumer costs by $5.75 million. (Reporting by Nichola Groom; editing by Andre Grenon)