Leadership & Strategy

Efficient Use Of Energy

AEP is proud of the efficiency gains we’ve been able to accomplish over the last several years across our service territory, and 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 should be 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 to expand these consumer offerings. Appropriate recovery of program costs, lost revenues and an opportunity to earn a reasonable return ensures that energy efficiency programs are considered equally with supply side investments, such as power plants. In the future, AEP needs certainty and consistency around cost recovery for energy efficiency mandates from our state commissions. We need to be treated fairly and uniformly and have the opportunity to earn a return on our investments and recover our costs to comply with those mandates.

“The successful utilities of the future will figure out how to truly make energy efficiency a key element of their business model.”
- AEP Stakeholder

In 2008, AEP established a goal to reduce demand by 1,000 megawatts (MW) and energy consumption by 2,250,000 megawatt-hours (MWh) by the end of 2012 through energy efficiency and demand response programs. Since that time, AEP’s operating companies have implemented a wide variety of new consumer programs across most of the states we serve. In fact, more than 100 energy efficiency and demand response programs are now in place. This allowed us to achieve our objective of ramping up energy efficiency programs where they are supported.

Preliminary estimates indicate that we exceeded our goal. From 2008 through 2012, AEP achieved 3,016,400 MWh of energy reduction and 1,011 MW of demand reduction, or 134% and 101% of goal, respectively. For the same period, AEP’s operating companies have invested more than $368 million in energy efficiency and demand response initiatives. Final results are subject to independent third-party evaluation and verification of savings, as required.

However, with increasing efficiency standards, such as enhanced building codes and appliance standards, we are concerned that energy efficiency mandates will become more difficult to achieve in the future. Regulators in some of our states are rethinking their mandates in part due to cost and achievability. Our concern is that financial penalties could be imposed if we do not achieve escalating benchmark requirements, even if a good-faith effort was made.

Further, certain mandated requirements may be virtually unachievable from an economic perspective. In other words, the cost to attain the participation requirements could be much higher than the overall benefits associated with the corresponding impacts. In such instances, AEP would be opposed to implementing any programs that are not cost-effective, and AEP should not be penalized for not achieving energy efficiency targets.

AEP System Energy Efficiency Results For 2012

We have also made significant investments to enhance the efficiency of many of our coal-fired plants, thereby offsetting the energy needed to run emission control technologies. And we have taken measures to reduce energy consumption in our office buildings and service centers. We reduced our kilowatt-hour (kWh) usage by 23.8 percent by the end of 2012, compared with the 2007 baseline. The equivalent accumulated savings from reduced energy consumption at more than 400 facilities exceeds $12 million. We achieved these energy consumption reductions through equipment investments, such as new heating and cooling equipment, 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, as well as reduce our impacts to the environment.

In addition to energy savings in our buildings and power plants, AEP Transmission installed new low-loss transformers at two of its stations in 2012. These new transformers provide more than a 30 percent reduction in total energy losses compared with the transformers installed in previous years. The higher efficiency transformers have lower energy losses from the equipment and will provide significant cost savings over time.

The New Turk Power Plant

The 600-MW John W. Turk, Jr., Power Plant in southwestern Arkansas is among the nation’s cleanest, most efficient pulverized coal plants.

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