Business Performance

System Reliability

Parts of AEP’s service territory sustained historic damage in 2012 due to severe weather. The two most significant weather events were the June 29 derecho and “Super Storm Sandy” in late October. The derecho was part of a fast-moving thunderstorm system that crossed the Ohio Valley and Eastern United States with heavy rain, hail, average wind speeds of 60 mph and gusts up to 80 to 100 mph – the same as a Category 2 hurricane. Only there was no warning as there is with hurricanes.

de·re·cho - /dāˈrāCHō/

A derecho is a widespread, long-lived straight-line wind storm associated with a fast-moving band of thunderstorms. Wind is sustained and increases in strength behind the front, generally exceeding hurricane force. A derecho is most likely to occur in the summer.

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With power knocked out on AEP’s system to more than 1.4 million customers of AEP’s 5.3 million customers at the peak of the outage, governors in Ohio, Virginia and West Virginia declared states of emergency. AEP Ohio was hardest hit by outages with more than 738,700 customers without power at the peak – nearly 50 percent of the company’s entire retail customer base. More than 400 transmission towers were damaged in Ohio alone. APCo experienced an estimated 570,000 customers without power at the peak, I&M lost an estimated 118,000 customers and KPCo lost an estimated 64,000 customers.

The June 29 derecho knocked out power to more than 1.4 million customers of AEP's 3.5 million customers at the peak out the outage.

Neighboring states were also hit hard with extensive outages by this storm, making it necessary to pull restoration crews from greater distances than normal. This added to the challenge of quickly restoring power because it took those crews longer to arrive where we needed them. Another challenge we faced came from the extreme heat that affected the area. Safety of our crews during outages is of paramount importance to us. The heat made it more difficult and resulted in some cases of heat exhaustion and dehydration of crew members. Restoration of service took more than a week in some areas as new storms swept through the region nearly every day, causing additional outages and limiting crews’ ability to work safely. In some cases, restoration took even longer because of the remoteness or extent of the damaged equipment. APCo estimated the storm caused approximately $37 million in damage. AEP Ohio’s damage tally from the derecho and subsequent storms was an estimated $61.8 million. By comparison, the remnants of Hurricane Ike in 2008 led to $30 million in maintenance costs in Ohio. We are seeking recovery of these costs from our state regulatory agencies.

“As (Super Storm) Sandy has showed, long periods without electricity affect every aspect of our society from business to health to personal lives. We are dependent on reliable and affordable electricity. Cell phones and iPads don’t work if batteries cannot be recharged.” - AEP Stakeholder

Our communication with customers during the derecho took on a new dimension because of the growing use of social media venues such as Twitter, YouTube and Facebook. We more quickly became aware of customer problems and perceptions, and we adapted our response plan accordingly. A major element of that plan is our “one voice” communication strategy, whereby we make sure messages conveyed to those outside AEP – regulators, community leaders, customers, the general public and other stakeholders – are uniform and consistent.

AEP's most notable assistance was that provided in the wake of Super Storm Sandy.

In addition to the derecho and Super Storm Sandy, KPCo was also adversely impacted by two other major storms. In February, more than 34,000 customers – roughly 20 percent of the company’s customers – lost power as a result of a snow storm that dumped more than 12 inches of wet, heavy snow across the company's service area. A few weeks later, in March, the company's service area received national attention when an unprecedented number of tornadoes tore across Johnson, Lawrence, Magoffin and Martin counties in eastern Kentucky, devastating the towns of West Liberty and Salyersville and causing more than 14,000 customers to lose power. In both cases, despite widespread damage, KPCo mobilized to restore power completely in less than seven days.

When weather events result in significant widespread outages, utilities seek help from other utility companies and contractors. This practice of mutual assistance, which dates to the 1950s, helps companies in our industry mitigate risks and costs associated with major power interruptions by sharing resources. The utilities that seek assistance pay the costs of peer companies and contractors that provide labor and equipment.

During 2012, AEP received assistance from utilities around the country to restore power to our customers, but we also provided assistance to other utilities that needed our help. AEP’s most notable assistance was that provided in the wake of Super Storm Sandy. While power was being restored to more than 200,000 customers of APCo and KPCo, AEP and contract crews also assisted utilities in the Northeast. In fact, about half of all AEP employee and contract line resources were dedicated to helping other utilities recover from Sandy’s devastating effects. The Edison Electric Institute honored AEP with its Emergency Recovery Award for the derecho and an Emergency Assistance Award for the aid we provided to other utilities in the wake of Super Storm Sandy.

In light of recent severe storm events, our industry is considering new ways of thinking about grid infrastructure and its resilience, as the risks associated with such events can affect financial health, customer satisfaction and our reputation. There is an industry-wide effort under way, in collaboration with other organizations, to research ways to make the grid better able to withstand extreme weather events, so that less focus is needed on restoration after major damage occurs.

Closing Bell at the NYSE

AEP CEO Nick Akins was among a group of executives to ring the closing bell at the NYSE at the close of 2012 COMMIT!Forum in New York City.

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