AEP is committed to pursuing energy efficiency and DSM programs in all of the states in which we operate. We believe these programs should be an important part of our Integrated Resource Plan. The challenge is that we have some of the lowest electricity rates in the country, making it difficult for such programs to pass the "cost-effectiveness" tests that can motivate behavior changes. Reasonable cost recovery is an issue for us, too, in some jurisdictions. We support greater consistency across supply-side and demand-side cost recovery treatment but continue to face a regulatory preference for supply-side investments in many states.
Much to the frustration of some stakeholders, we previously did not have a clearly defined policy on energy efficiency. In 2007, therefore, we clarified our policy and developed a strategy (through our gridSMARTSM initiative) to take us beyond traditional energy efficiency and DSM programs.
We fully support programs that result in additional conservation and reduction – critical components in addressing climate change. We have ongoing programs in Kentucky and Texas, have recently initiated several programs in Arkansas, and have requested approval for programs and related cost recovery in Oklahoma and Indiana. As part of our gridSMARTSM initiative we will begin approaching regulators, customers and other stakeholders in the remaining states we serve. View a state-by-state review of energy efficiency programs and actions in AEP's service territory.
Energy efficiency strategy must go far beyond changing light bulbs and rebates. Our gridSMARTSM initiative seeks to put consumers in control of electricity usage by giving them the information about when energy is at peak demand, and when there is excess capacity in the system – and enabling them to adjust their usage accordingly. Facilitating informed decisions by our customers will help us reduce the number and length of outages, improve service and postpone the need for new generation. (Read more about gridSMARTSM in the Energy Security, Reliability & Growth section.)
Overall, our philosophy on demand-side efficiency is to help our customers understand the true value of electricity, in the belief that they will be motivated to change how they use it – and be more likely to embrace technologies and rate structures that encourage energy conservation. Many of our stakeholders, including customers, employees and regulators, agree with this philosophy and we will continue to work with them to make it not just a philosophy but a reality.
