Technology and Innovation

Energy Efficiency

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AEP is proud of the energy efficiency gains we’ve been able to accomplish with our customers across our service territory over the last several years. We have always encouraged our customers to use energy wisely and efficiently. Today, we see achievable levels of energy efficiency and demand response as important resources that are incorporated into our integrated resource planning process.

Energy efficiency and demand reduction programs have received regulatory support in most of the states we serve, and appropriate cost recovery will be essential for us to continue with these consumer offerings. Appropriate recovery of program costs and net lost revenues, as well as an opportunity to earn a reasonable return, ensures that energy efficiency programs are considered financially comparable with supply-side investments, such as power plants.

Starting in 2008, AEP ramped up efforts to reduce peak demand by 1,000 megawatts (MW) and energy consumption by 2,250,000 megawatt-hours (MWh) system-wide by the end of 2012 through the introduction of additional energy efficiency and demand response programs. Since that time, AEP’s operating companies have implemented more than 100 energy efficiency and demand response programs across our service territory.

From 2008 through 2013, these programs reduced energy consumption by more than 4 million megawatt-hours (MWh) and peak demand by more than 1,200 megawatts (MW). To achieve these levels, our companies invested approximately $540 million during that period. These results are preliminary and subject to independent third-party evaluation and verification of savings, as required. In addition, for the 2013/2014 PJM delivery year, AEP has approximately 600 MW of demand response capability in the PJM Interconnection.

The U.S. Environmental Protection Agency (EPA) awarded AEP Ohio the 2013 ENERGY STAR Partner of the Year Award for its Efficient Products program. The Efficient Products program includes energy efficient lighting discounts for CFL and LED light bulbs, and appliance rebates for ENERGY STAR certified refrigerators, freezers, clothes washers, high-efficiency electric water heaters and heat pump water heaters. AEP Ohio offers a variety of energy efficiency programs and discounts to help residential customers save money and energy.

The EPA also awarded AEP Texas Central Company a 2013 ENERGY STAR Partner of the Year Sustained Excellence Award for continued leadership in protecting the environment through its high performance New Homes program. The New Homes program provides outreach, education and marketing for ENERGY STAR certified homes.

Public Service Company of Oklahoma received a 2013 ENERGY STAR Partner of the Year Sustained Excellence Award, as well, for continued leadership in protecting the environment through its Home Performance with Energy Star program. The program provides homeowners with incentives to upgrade their homes using a holistic approach.

I&M received regulatory approval to eliminate the use of a third-party program administrator in its Michigan service territory. This gives the company more control over the types of programs that are offered and the level of spending to support those programs. In addition, both the Michigan Public Service Commission and the Indiana Utility Regulatory Commission have approved plans for I&M to qualify VVO as an energy efficiency program.

With increasing efficiency standards, such as the implementation of more efficient lighting standards, we are concerned that energy efficiency mandates will become more difficult and costly to achieve in the future. Legislators in some of our states are rethinking energy efficiency requirements due to these cost and achievability concerns as well. Our concern is that financial penalties could be imposed if we do not achieve escalating benchmark requirements, even if a good-faith effort is made.

Further, certain mandated requirements may be virtually unachievable from an economic perspective. In other words, the cost to attain participation rates necessary to achieve the targets could be much higher than the overall benefits associated with the corresponding impacts. In such instances, AEP would be opposed to implementing energy efficiency and demand response portfolios that are not considered cost-effective, and we believe it would be unfair to penalize us for not being able to reach these unachievable energy efficiency targets.

We have also taken measures to reduce energy consumption in our office buildings and service centers. We reduced our kilowatt-hour (kWh) usage by 25 percent by the end of 2013, compared with the 2007 baseline. The equivalent accumulated savings from reduced energy consumption at more than 300 facilities exceeds $17 million. We achieved these energy consumption reductions through equipment investments, such as new heating and cooling systems, and an employee education campaign. By reducing usage, we are able to sell the unused energy in the wholesale energy market, or not produce it at all, while reducing our impacts to the environment.

Efficiency in Coal

While our generation portfolio has shifted over the last decade to include more natural gas-fueled and renewable generation, we also completed construction of the country’s first ultra-supercritical coal-fueled unit, the John W. Turk, Jr., Power Plant in Hempstead County, Ark., in late 2012. The Turk Plant represents a new generation of plant design using a higher temperature and pressure steam cycle that requires less fuel to produce each megawatt-hour of electricity. The plant’s advanced thermal cycle ranks it among the most efficient coal plants in the world. It also means that all emissions, including sulfur dioxide, nitrogen oxide, mercury and carbon dioxide, are lower than conventional coal-combustion processes per unit of electricity produced.

This unit was designed to provide low-cost base load power to complement new gas generating resources that were built in recent years. A significant addition to the generating fleet along with new natural gas units, the Turk Plant allows Southwestern Electric Power Company to continue its strategy of fuel diversity that has benefited customers for decades.

We have also made significant investments to enhance the efficiency of many of our coal-fueled plants, thereby offsetting the energy needed to run emission control technologies.

Building the Utility of the Future

At AEP, we are building the electric utility of the future. Although we can't predict what will happen, we know that our industry is changing at a fast pace, we must be adaptable and we must be willing to embrace and lead change.

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