Dear Friends & Colleagues,
Imagine a world where electricity is assured; where technologies enable power plants
to run cleaner and help consumers to use energy more efficiently; where nations
come together to address climate change and where economies and communities prosper
and grow. Imagine a world in which you control the amount,timing and price of the
electricity you use.
At American Electric Power (AEP), we are not just imagining this world, we are working
toward it. And sustainability is our road map. Electricity is necessary for a modern
society, yet its very production has adverse impacts on society. AEP produces more
greenhouse gases than most electric companies in the United States, so we have an
increased responsibility to be part of the climate change solution, internationally,
nationally and locally.
For more than a century, AEP has created new ways to provide power for today while
preparing for the needs of tomorrow. While others may watch and wait, we move aggressively
to meet those challenges in new and exciting ways. We maintain our leadership by
innovating and by turning responsibility into opportunity through technology and
efficiency.
Our employees play a key role in leading us forward and their well-being is our
paramount concern. We accomplished a goal in 2007 that had eluded us for 10 years:
no AEP employee lost his or her life while working. I am profoundly thankful and
relieved about this, and I am determined that we continue to do more to prevent
fatalities and injuries in this year and in the future.
I am unhappy to report, however, that last year we had more recordable injuries
and more safety inspections and fines from the Occupational Safety & Health
Administration than in 2006. Our goal is to be "best in class" by 2010
and we must intensify our commitment to get there. We also must insist that our
contract work force improve their safety performance, or they will not be allowed
to work for AEP. Safety and health are a personal obligation and a collective responsibility,
one that we must embrace and share. I will never stop making that point.We must
not take shortcuts or unsafe actions that can have dire consequences to us, our
co-workers or our families.
We took a major step toward creating a sustainable future last year by obtaining
a far better understanding of how our stakeholders want us to measure, manage and
account for the full range of our impacts, both positive and negative. Technology
can and will provide many solutions, but not without the support and trust of our
stakeholders, who have to live with the results of that technology. We must be allowed
to test and validate these new technologies and we need their support for this.
Stakeholder engagement is making AEP a better company.This year we engaged many
more stakeholders in the process. These thoughtful discussions gave us a greater
understanding of who we are and what is expected of us, much of which is reflected
in this report.
Scientific evidence has led us to conclude that human activity has contributed to
global warming. We will continue to be part of local, national and international
efforts to find a reasonable, achievable approach to carbon controls. We are working
to develop federal legislation that combines a mandatory cap-and-trade program with
provisions to ensure the participation of all countries. We believe strongly that
carbon caps must have broad bipartisan support and not cause serious harm to our
economy. Federal climate policy must recognize coal's vital role in our nation's
energy independence; we cannot afford to turn our back on this abundant, domestic
resource. We support a more diversified and domestic-based energy supply mix, increased
energy efficiency and greater investment in new energy technologies.
We took a leading role in addressing climate change on the international stage last
year. AEP was one of 10 global companies that worked with the World Business Council
for Sustainable Development's Electricity Utilities Sector Project to identify shortand
long-term technology solutions and to call for international public policies to
promote them. This WBCSD report was presented to leaders from more than a dozen
countries at the United Nations' international climate negotiations in Bali, Indonesia.
For AEP's part, we are working to bring advanced coal technologies, including carbon
capture and storage, ultra-supercritical pulverized coal and Integrated Gasification
Combined Cycle (IGCC) to commercial operation. We are pleased that the West Virginia
Public Service Commission recently approved our proposed 629-MW IGCC plant, a decision
that recognizes the importance of this technology to our future energy security.
We hope for a similar decision from the Virginia State Corporation Commission.
We are disappointed that a recent decision of the Ohio Supreme Court on our proposed
IGCC plant rejected a PUCO-approved mechanism for timely recovery of future costs
of the project. We remain hopeful we can resolve this issue.
Meanwhile, we will complete a validation project for carbon capture at our Mountaineer
Plant in West Virginia in 2009. We plan to have the equipment and permits we need
this year to drill the underground wells that will permanently store the carbon
dioxide. We also received some approvals for one of our advanced clean-coal plants
– the Turk Plant in Arkansas – but, unfortunately, Oklahoma rejected
the other.
We were disappointed with the Department of Energy's (DOE) decision to end its funding
of the FutureGen project –the first near-zero emissions coal power plant.
The DOE has restructured the FutureGen project funding, giving us an opportunity
to receive funds to support our carbon capture and storage initiatives, and we are
pursuing that option.
Electricity production is only part of the equation. It is critical to harness new
sources such as wind, biomass and solar and to have the ability to deliver electricity
across state and regional boundaries to where it is most needed. We believe an extra
high voltage interstate transmission system regulated at the federal level, similar
to natural gas pipelines, is in the nation's best interest. The existing transmission
system simply cannot meet the growing demand for energy, including energy efficiency
and renewable energy.
We envision an enhanced electric distribution system, giving our customers far more
control and choice over their electricity, much like they now decide which mobile
phone plan to buy. Freedom of choice will be an enormous benefit to our customers,
enabling them to reduce consumption, control costs and limit their individual environmental
impacts.
This distribution system, part of our gridSMARTSM initiative, will also
provide data to improve service reliability, increase efficiencies on our system
and reduce customer outage times. Our agreement with the General Electric Co. to
deploy equipment and technology programs is an important component of our plan to
supply our 5.2 million customers with "smart meters" by 2015 to give them
the information needed to control their electricity use.
We continue to be challenged by an aging work force: 18 percent of our employees
are eligible to retire today and 10 percent of our employees are likely to do so
in the next four years. This is significant because it takes years to train employees
to operate power plants or work on the electric transmission and distribution system.
Our employees have shared their concerns about this challenge and we are working
to provide more information about our plans. We must continue to have a stable,
diverse, knowledgeable and motivated work force in the future in order to meet our
business goals.
We see a world in which energy transmission is facilitated and climate change is
addressed; a world in which electricity is created from more diverse and cleaner
sources and used more efficiently with far more control in the hands of users. We
see a senior management team and work force that is prepared and eager to lead this
change, with the ability and commitment to make it happen. Working with others,we
have the power and the talent to make it happen.
Thank you for your interest in American Electric Power.
Sincerely,
Michael G. Morris
Chairman, President and Chief Executive Officer
