Last year, we explained why AEP has not joined the United States Climate Action Partnership (USCAP). USCAP recently issued a more detailed blueprint for climate policy. We have carefully reviewed the revised USCAP proposal, which offers more detailed recommendations on key elements of climate policy, and found it is now much closer to AEP's position. It includes a moderate initial cap, large allocations to the electric sector, significant commitment to technology development, limited restrictions on offsets and the use of an international pool of allowances as a cost containment mechanism. USCAP's new recommendations also acknowledge that allocation is necessary to provide a smooth transition for consumers, transform the economy and modernize energy infrastructure. It also explicitly notes the need for a full allocation of allowance value, at least initially, to local electric distribution companies to help cushion the rate impacts that will occur from a climate program.

Though the USCAP blueprint doesn't contain an explicit price-based safety valve (or cap on price) that AEP supports, it includes language that will help contain costs, including tropical rain forest preservation credits that can be released into the allowance trading system to help contain sharp price hikes. Many of these cost containment principles are in the Dingell-Boucher draft bill from late 2008, which AEP has supported.

While we still don't agree with the cap beyond 2020 and the level and severity of reductions required, we are in basic accord with most of the principles in USCAP today. Some of our stakeholders want AEP to join USCAP or support its recommendations. We are in much closer alignment on key issues than we were a year ago, and we are considering these possibilities carefully.