Energy efficiency and DSM programs have long been used by the utility industry and
regulators to encourage energy conservation and thereby reduce the need to build
new power plants. Because AEP has been a low-cost provider, our customers and regulators
have been comparatively slow to embrace these programs as cost-effective. While
they may agree in principle with the goal of energy conservation, low prices reduce
the financial incentives to act quickly.
More recently, however, increasing fuel prices, escalating new generation costs,
new greenhouse gas concerns and the availability of new technology have combined
to bring greater interest and attention to energy efficiency and DSM programs in
our 11 states. AEP has embraced cost-effective programs as a key component of our
climate strategy as a resource to keep energy costs affordable, and as a way to
potentially delay the need for new power plants. We have modified our policy on
energy efficiency and DSM to reflect this commitment.
One major challenge in this new environment is the difference of opinion among our
stakeholders. While some groups advocate for more aggressive programs, our commercial
and industrial customers tend to see higher rates as the difference between turning
a profit and operating at a loss – or even being forced out of business. It
is an example of the tension that exists between those who want us to implement
new programs, ahead of regulations, and those who don't want to pay for programs
that benefit others.
Rates AEP's retail customers pay versus the average cost of electricity in AEP states
AEP has set a self-imposed goal of reducing demand by 1,000 MW by 2012 through customer
programs and internal energy efficiency improvements. Each program will be tailored
to each state's regulatory requirements and will be promoted by the individual operating
companies. Proposals to some state regulators began in 2007. We have committed that
15 percent of these efficiencies will come from within – reduced energy consumption
at our facilities, transformer efficiencies, etc. The remaining 85 percent will
come from customer programs. (For more about AEP's position and actions on energy
efficiency and DSM, see the Climate Change section. For a state-by-state overview
of where we made progress in 2007, visit
www.AEP.com/cr/energyefficiency.)
