Leadership & Strategy

Operating Company Model

We have a responsibility to deliver safe, reliable, quality electricity to our customers. In doing so, we strive for operational excellence and seek to deliver the best customer service we can. To support this compact, we are dependent upon a regulatory framework that determines the rates we can charge our customers to operate and maintain our system and the returns we can earn on our investments – unlike most private sector companies.

AEP Utility Revenue By Class

Our shareholders lose value and the company’s earnings suffer if we make investments and are not allowed to recover our costs or are unable to earn a reasonable rate of return. At the same time, customers are sensitive to rate increases. To address this issue, we decentralized our business operations model, putting more responsibility and accountability in the hands of our operating company presidents.

As a result, operating company presidents have more autonomy along with greater responsibility for their companies’ balance sheets, credit ratings, liquidity, earnings, capital allocation, rate base growth, regulatory relationships and overall performance. They work collaboratively with all other business units and with each other to meet the needs of their customers. This local approach also strengthens their relationships with their communities and provides a better understanding of what local regulators will support.

This improved line of sight has helped us to develop several rate frameworks that have enhanced our ability to recover costs. We also have improved many of our regulatory relationships, which are important as we embark on significant capital investment programs to comply with environmental regulations, invest in our transmission infrastructure and maintain the operational integrity and reliability of the entire system.

In spite of this localized control, our operating companies are challenged by the availability and competition for finite capital resources, the demands of operating and maintaining an aging grid, more environmental and reliability regulations, growing retail competition in some states, a sluggish economy, and little growth in electricity demand. They must address these competing needs while balancing customers’ ability to pay for the increasing costs of maintaining a reliable electric system.

AEP Operating Company Profiles

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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