Public Policy Strategy
AEP is regulated by the public service commissions in the 11 states we serve, as well as the Federal Energy Regulatory Commission at the federal level. Regulators review AEP's costs to ensure we are acting responsibly and prudently.

In return, we have the opportunity to recover our costs and earn a reasonable return. AEP represents its own as well as its customers' and shareholders' interests before Regional Transmission Organizations (RTOs), Independent System Operators (ISOs), Congress and with state and federal agencies.

As a company that operates in a highly regulated industry, AEP conducts robust public policy activities on the local, national and international levels. These may range from local zoning questions regarding the siting of equipment or facilities to international issues regarding climate change. These issues can influence what customers pay for electricity.

Our stakeholders care deeply about public policy and want to know more about our involvement. We work with many stakeholders in the public policy process and believe that collaboration is essential if we are to solve complex problems such as climate change. Our stakeholders suggested that our public policy positions should be developed more collaboratively with them before we go to regulators or legislators. We agree. For example, the Arkansas Sierra Club asked us to work with them and others to develop a reasonable renewable energy standard for that state. Our Southwestern Electric Power Co. is now discussing this with them.

Our public policy positions are developed with input and assistance from many departments, including the Board of Directors, the CEO and our Executive Council, Regulatory Services/Public Policy, Environment, Safety & Health and Facilities, Generation, Transmission, Corporate Communications, Human Resources, our operating companies and our Washington, D.C., office, among many others. We work with organizations such as the National Association of Regulatory Utility Commissioners, National Conference of State Legislatures, American Legislative Exchange Council, Council of State Governments, National Governors Association and regional governors associations to ensure that our positions are responsible, well-articulated and coordinated.

Seven core public policy objectives guide our activities as we develop positions that would further the company's ability to:

• Produce electricity safely, reliably and at a reasonable price.
• Expand and reinforce the transmission infrastructure to create a robust system that can be used to support the next generation of electricity supply resources, including renewables. This will also reduce congestion and energy losses, thereby reducing costs.
• Meet the growing demand for clean energy.
• Help our customers manage their consumption through energy efficiency programs designed to balance the impact of increasing fuel costs, meet environmental requirements and manage infrastructure issues.
• Increase environmental protection through reasonable and voluntary efforts.
• Ensure regulatory cost recovery for generation, transmission, distribution and environmental compliance investments in markets subject to regulation.
• Provide a reasonable total return (including ROE and market growth) for shareholders, thereby helping to ensure AEP's financial stability needed to meet these policy goals.