America's conservation ethic is not what it should be; we are 5 percent of the world's population and consume 25 percent of its natural resources, including fossil fuels. Even though much of this is driven by our high standard of living that includes larger homes and vehicles and all manner of electronics and appliances, our lifestyles could be far more energy efficient.

Because we have some of the lowest electric rates in the country, the push for energy efficiency programs historically was not strong within our service territory, except where they were mandated. But as the cost of electricity and the cost to build new power plants increases, energy efficiency and demand response programs become essential.

We recently completed market potential studies in most of our states and have noted that public support is growing. We were disappointed by a recent decision in Indiana that was critical of our energy efficiency efforts. We failed to provide sufficient supporting data to justify the programs we proposed. We intend to work with stakeholders in the ongoing collaborative to develop comprehensive programs with measurable, verifiable goals. We are committed to meeting the commission's and our stakeholders' expectations for energy efficiency and demand response programs.

To raise awareness on this issue, we launched a campaign to educate and provide tools for our employees to become better stewards of energy at work and at home. In a recent survey, 87 percent of employees said energy efficiency is very important or extremely important for America's energy future. When asked how energy efficient they are at home, 56 percent said cost is what keeps them from doing more, while 95 percent said cost savings is their strongest motivation.

Our stakeholders asked us to set efficiency goals that include both a reduction in energy use and a reduction in demand. As a result, we set a first-time goal to reduce energy consumption by 2,250,000 megawatt hours (MWh) by the end of 2012. This goal would equal 1 percent of our energy sales in the year 2012, or the equivalent electricity to power 200,000 homes for a year. We set this goal based on an Electric Power Research Institute study that found that U.S. energy efficiency programs could realistically reduce the rate of consumption growth by 22 percent and achieve a 3.3 percent absolute reduction in consumption by 2020. However, when all of our market potential studies are completed, we will reevaluate our goal to better align it with those studies. We must still receive regulatory approval for the energy efficiency programs that will help us achieve this goal, and we will look to our stakeholders for their support.

Stakeholders asked AEP about the potential to hire staff to conduct energy audits. Typically, we conduct energy audits and other energy efficiency programs through third-party vendors.

In 2007, we set a goal to reduce demand by 1,000 MW by 2012. We have identified 561 MW of potential reductions through customer programs. This, plus a new goal to reduce energy consumption by 2,250,000 MWh by 2012, is a realistic goal that we believe we can attain, and we will work with our regulators in our 11 states to gain their support.

In Oklahoma, Public Service Company of Oklahoma implemented several "quick start" programs that include recruiting customers to reduce usage during peak periods and partnering with the Oklahoma Department of Commerce, the Choctaw Indian Nation and Rebuild Together Tulsa on a low-income weatherization program. We see early positive results that will improve over time. Arkansas also initiated "quick start" programs last year.

We are using metered electricity more efficiently within our own facilities. In 2008, we set an energy consumption reduction goal of 3 percent over 2007. We achieved a systemwide energy consumption reduction of 4.2 percent. Our goal is to reduce internal energy consumption by 8.5 percent by the end of this year, and 20 percent by 2012 by installing temperature controls, new heating and cooling equipment and changing lighting. We also made significant changes to our Corporate Data Center, a large consumer of electricity, resulting in a 9.6 percent reduction in energy use by modifying how we operate and by using new virtualization technology that is more energy efficient. Lower energy consumption reduces cooling requirements for the data center. The annual savings is estimated at $22,000 and avoids 489,000 pounds of carbon emissions per year.