AEP Chairman Mike Morris provides clarity around AEP's position on climate legislation.

Since AEP's 2009 Corporate Sustainability Report was published, much has happened in the U.S. Congress to advance climate legislation. Here is an update on the activity and where AEP stands.

The passage of the American Clean Energy Security Act by the U.S. House of Representatives (H.R. 2454) creates a sound foundation for climate change legislation and will now be taken up by the U.S. Senate later this year.

The measure would create a cap-and-trade program for emissions; a renewable energy standard (a 15 percent renewable standard and 5 percent efficiency standard); and, would support the development of carbon capture and sequestration technology. While AEP supports this bill, we believe it can be improved upon to further reduce the cost to customers and the affect on the economy. For example, we believe that the initial compliance year of 2012 is too soon for practical implementation of a law of this complexity, and our preference is for a longer phase out period for the transition from allocations to auctions. We support a legislative approach to climate change versus regulations from the U.S. Environmental Protection Agency (EPA); we believe EPA oversight could be much more costly, less flexible and cause greater harm to the economy in the long run.

Under the 1,400+-page bill’s provisions, emissions are scheduled to decline by 17 percent from 2005 levels by 2020 and 83 percent by 2050.

AEP supports the bill and will continue to work with members of the House and Senate to improve it. The revised legislation provides a solid foundation for addressing the challenges of climate change including the following positive elements:

• An allocation of allowances that reflects roughly 90 percent of the utility sector’s share of a declining emission allowance cap. By providing these allowances to the local regulated utilities, the impact on utility customers is reduced.
• The bill strongly supports the development of carbon capture and storage (CCS) through bonus allowances and the inclusion of the important provisions related to construction of CCS facilities, as originally sponsored by Representative Boucher.
• The bill supports the use of offset credits and projects, both on the national and international level. These include a wide range of offset activities, and notably also now includes forestry projects in the developing world. AEP will work to enhance these provisions.
• The bill enables backstop siting authority for some transmission in the Western Interconnection. AEP will work for additional, stronger reforms that support planning, siting and cost allocation for extra-high voltage transmission in both the Eastern and Western Interconnections.