Doing business with AEP now means that suppliers are subject to greater scrutiny of their environmental performance. When AEP issues Requests for Proposals, suppliers are asked about their environmental practices to determine if they align with AEP’s vision for sustainability. This is a first step in our commitment to hold ourselves accountable for the performance and practices of our supply chain. We also are developing a statement of principles for our supply chain that will include environmental expectations and other issues.
The Green Suppliers Network program includes an environmental assessment of the supplier’s business conducted by the U.S. EPA. When we joined in 2007, we set a goal to enlist five non-fuel suppliers to participate in the first year. By the end of the year, 10 suppliers were on board. Early results showed improved environmental performance as well as more efficient business operations.
AEP is a founding member of the Electric Utility Industry Sustainable Supply Chain Alliance. This group of 15 electric utilities across the United States is focusing initially on developing environmental performance criteria for suppliers specifically related to poles and transformers. A sub-team was formed to engage with environmental groups and is processing the recommendations that were received.
Mountaintop mining practices are a
major concern for some stakeholders, who have raised a host of health and
environmental concerns stemming from the practice. Some of our stakeholders are concerned that we purchase coal from suppliers who employ mountaintop mining practices. They have asked us to use our influence as the largest coal-burning utility in the United States to help end
this type of mining.
In our last report, we committed to establishing criteria to evaluate the environmental, safety and health performance of coal suppliers. We began discussions with some environmental groups, coal suppliers and peer utilities and now have a timeline to develop this evaluation process by year-end. We are hiring a mining expert to help us identify the right performance indicators; we also will meet with stakeholders during this process. We believe this process will help us begin to evaluate the social aspects of coal mining, give us an accurate understanding about how much of our coal comes from mountaintop mines and allow us to make more informed decisions in the future. We will have to test any possible purchasing restrictions and subsequent price increases with regulators for their acceptance and will look to our stakeholders to support us with our commissions.
We do know that the percentage of mountaintop-mined coal that we consume is decreasing, but we do not know by how much. Scrubbers and other environmental plant controls require a different type of coal. We also are converting equipment to burn other types of coal that will further decrease our need for mountaintop- mined coal. We’re conducting a detailed analysis this year.
We face three challenges — what will replace this type of coal in the longer term; how to deal with the increased costs involved and the fact that our competitors will, in all likelihood, continue to use it; and how much influence we can realistically exert on our suppliers. We plan to continue these discussions and seek long-term solutions.
Whether a fuel or non-fuel supplier, we don’t want to do business with companies that persistently violate environmental laws or that have poor records on safety and health.
