In the past, AEP’s low rates have served as a disincentive to regulators to approve energy efficiency and demand response programs because these programs often cost customers more, not less. But the recession and the rising cost of energy give us two compelling scenarios in which we can raise awareness of energy efficiency alternatives with customers and policymakers. When the nation’s economy begins to recover, energy prices are likely to increase, which will provide further incentive for energy efficiency and demand response programs.

We are developing and implementing energy efficiency and demand response programs throughout our service territory in concert with our regulators and other stakeholders. Our programs are of significant interest to several stakeholders, including environmental groups.

The challenge is to create cost-effective programs that reduce energy consumption and demand so that capital expenses for new generating plants and infrastructure can be deferred or possibly avoided. These programs would ideally put utilities in a position of financial indifference between investing in new generation or demand response and efficiency.

We expect to have market potential studies completed in 10 of our 11 states this year. Programs are in place in Arkansas, Kentucky, Oklahoma and Texas and have been proposed for Indiana and Michigan. In Ohio, the Public Utilities Commission approved programs as part of AEP Ohio’s Energy Security Plan. Programs approved by regulators will be customized by each operating company based on several factors, including the cost of power, housing characteristics, air conditioning use, billing data, demographics and type of customer. We recently had a disappointing energy efficiency decision in Indiana and will work harder to make our case to the commission based on the outcome of our market potential study. (Read more about this in the Climate Change section.)

The American Recovery and Reinvestment Act of 2009 ("the Stimulus Bill") includes significant energy efficiency provisions, such as incentives for home weatherization. We will work in our states to implement those programs where it is possible for us to do so.

AEP Energy Efficiency & Demand Response Programs
AEP has assembled a number of energy efficiency and demand response programs aimed at different types of customers. Below is a list of the more common programs by customer type. Not all programs will be offered in all jurisdictions, and some may apply to specific jurisdictions.

Household / Residential Customer Programs
Low-Income Weatherization	Provides a variety of energy efficiency improvements to customers at or below a certain percentage of federal guidelines. Program partners include state assistance agencies, community action agencies and/or other third-party contractors.
ENERGY STAR New Homes	Home builders are paid incentives for building new homes that meet ENERGY STAR New Home standards, which require homes be at least 15 percent more energy efficient than homes built to 2004 International Residential Code, and must meet U.S. EPA guidelines.
High-Efficiency Heat Pumps	Incentives paid to residential customers and contractors who install qualifying high-efficiency heat pumps in their homes.
Home Energy Fitness	Provides turnkey energy analysis to qualifying customers, including blower door diagnostic analysis and a variety of energy efficiency and conservation measures.
Mobile Home New Construction	Incentives paid to customers and mobile home dealers for the installation of high-efficiency heat pumps (13 SEER and higher) and upgraded insulation packages in new mobile homes.
Residential Standard Offer	Incentives paid to participating contractors for installation of qualifying measures in retrofit applications.
Appliance Recycling	Provides for the pick-up and disposal of second, inefficient, working refrigerators and freezers.
Compact Fluorescent Lighting (CFL)	Provides monetary incentives for customers to replace incandescent bulbs with CFLs. Various delivery methods may be utilized such as point-of-purchase, rebate coupons and bill inserts.
ENERGY STAR Appliances	Provides financial incentives for the purchase of certain new appliances with an ENERGY STAR rating.
Renewable Energy Technology	Provides financial incentives for the installation of solar and wind equipment.

Commercial/Industrial Customer Programs
CitySmart Pilot	Incentives paid to cities for certain measures installed in new or retrofit applications that provide verifiable demand reduction and energy savings.
Commercial Solutions	Facilitates a comprehensive approach to help commercial customers identify various energy efficiency and cost-saving opportunities within the customer’s operation. It also provides the direct support, tools and training necessary for customers to independently evaluate benefits of potential efficiency improvements.
Energy Efficiency for Cities	Offers incentives to cities for installation of LED lighting retrofits for traffic signals, crosswalk signals and building exit lighting.
Load Management Standard Offer	Targets large commercial/industrial customers. Incentives are paid based on metered demand reduction to participating customers who have identified interruptible load that can be curtailed on short notice.
Schools Conserving Resources (SCORE)	SCORE Market Transformation Program targets school districts and cities to provide incentives for installation of qualifying measures that provide verifiable demand and energy savings.
State and Municipal LED Lighting	Provides incentives for the installation of new LED traffic signals in either a new or replacement installation.
Commercial and Industrial Lighting	Provides financial incentives for installation of new high-efficiency lighting systems in a non-residential facility in either a new construction or retrofit application.
Commercial and Industrial Motors	Provides incentives for the installation of new properly sized high-efficiency motors in a new application or as a replacement for a less efficient operating motor in a non-residential facility.
Commercial and/or Industrial Standard Offer	Provides monetary incentives, based on savings, for a variety of retrofit measures, including installation of chillers, motors, heating/ventilation/air conditioning, lighting and window tinting/shading.
Large Industrial Process	Open to large industrial and government customers (typically over 1,000 kW). Program may provide financial support and assistance to identify and implement energy savings through a partnering approach with large industrial customers.