Our work force is aging, which is a daunting challenge for AEP and for our industry. Many job categories require years of training before an employee is experienced enough to work in the field.

An overhead line worker, for example, will begin with a combination of classroom and on-the-job training to learn everything from how to climb a pole to how to safely handle live electricity. Even after four years, the worker may have the required training but is not yet qualified as a journeyman. In other parts of our business, such as generation and transmission, we have similar challenges.

We have focused our recruitment efforts on future needs and on developing and retaining employees. We hired 1,692 employees in 2007 and 2,189 in 2008. However, our hiring rate will slow considerably this year in response to the weak economy.

The good news for AEP is that we recognized the aging work force issue several years ago and have been aggressively recruiting and establishing alliances with two- and four-year colleges. This has resulted in more qualified job applicants with greater technical knowledge, which allows them to be productive employees sooner. Since 2003, 675 entry-level employees have begun training for distribution positions at our line school.

Looking forward, we expect the aging and shrinking work force will create long-term challenges to recruiting and retaining the talent we need to develop, operate and maintain the new technologies that will meet our customers' demands in the 21st century. One poten-tial recruiting barrier is the negative perception many people have about coal, especially today when the general push is for ‘green' jobs. As a result, we have enhanced our recruiting efforts to highlight AEP's standing as an innovative company, including our leadership in pushing advanced coal technologies.

We expanded our co-op program in 2008 to include our generation and construction management groups. A total of 132 students were placed in co-op/intern assignments involving all aspects of our business, from accounting and environmental services to information technology and Web design. We hired 51 percent of our co-op/intern program participants in 2008. We participated in 86 college relations/recruiting events at 30 different schools and collaborated with the Center for Energy Workforce Development in its efforts to direct the nation's youth toward careers in energy.

Our stakeholders have challenged us — and we are committed — to build upon our education partnerships to further develop a pipeline of industry workers who have the knowledge and skills we need. For example, we continue to engage undergraduate engineering programs through our University Alliance Program, which allows students to help with research at our Dolan Engineering Laboratories in Ohio. In 2009, we expect to expand our involvement by engaging graduate-level programs in our technology and consumer behavioral research studies.

AEP's leadership in sustainability is helping us to attract new talent, especially among younger generations who are extremely concerned about the environment. One of the first questions prospective employees often ask is how AEP is involved in renewable energy resources and advanced coal technologies.

In addition to partnering with schools, AEP's Indiana Michigan Power received rate support for work force development at the Cook Nuclear Plant. The money will be used to hire additional fire and security personnel required by new Nuclear Regulatory Commission regulations and also help the plant tackle aging work force issues in engineering and operations. This type of rate recovery can be a model for other states and illustrates that customers are willing to pay for reliability and a skilled work force.

A diverse work force is key to AEP's success because it brings a variety of cultures, generations, thought leadership and skills to our work. Although more than 33 percent of our employees are minorities and/or females, we face challenges in achieving our diversity targets in power plants and engineering jobs. This is due to the remote locations of many of our plants and the low number of females and minorities who study engineering.

We started the AEP Executive Women's Network in 2004 to foster professional networking among women executives and to encourage the professional and leadership development of women within the company.

AEP continues to partner with organizations that can help us increase, support and retain diverse talent, including the American Association of Blacks in Energy and the Women's International Network of Utility Professionals. In 2008, AEP joined the Board of Directors of the National Society of Black Engineers to encourage minority representation in professional and management jobs.

We have established strong relationships at universities with large minority female populations and have continued our aggressive recruitment program at the University of Puerto Rico, which has the largest percentage of minority female engineering students. We were proud to be recognized by Working Mother magazine in 2008 as one of the Best Companies for Multicultural Women.

We formed an informal alliance with Hard Hatted Women in 2008, a Cleveland, Ohio-based organization that helps women prepare for jobs in construction, manufacturing and other "nontraditional" employment through outreach, education, training, support and job placement assistance. While this relationship is still developing, our goal is to use organizations like this to let women know they can choose from a variety of jobs in the utility industry.

2008 Employment Data – EEO-1 (as of Aug. 31, 2008)

2007 Employment Data – EEO-1 (as of Aug. 31, 2007)

Our stakeholders emphasized the importance of culture — fostering a work atmosphere that brings out the best in all employees, helps us recruit and retain younger workers and ensures the company's future success. For the past several years, AEP's leadership team has been driving a culture of high involvement, shared commitment, agility, collaboration and mutual care.

We recognize that changing corporate culture can take years of demonstration and reinforcement of these values by the leadership team, managers and employees. While we still have work to do to make these cultural priorities the norm at all levels of the organization, we have made progress and have a plan to implement six new efforts in 2009 to enhance our culture. During a stakeholder meeting, employees suggested that AEP conduct a culture survey and focus groups, which we are considering.

In addition to work force diversity, we want a diverse base of suppliers and have made strides in this area. We purchase approximately 23 percent of non-fuel materials and services from diverse suppliers and have increased spending with these suppliers from $4.3 billion in 2006 to nearly $5 billion in 2008.

AEP developed a supplier diversity policy and received an "acceptable" classification in a supply chain diversity audit conducted in 2008 by the Small Business Administration (SBA). The SBA defines “acceptable” as a good faith effort to meet all of our own goals, but not meeting the rigorous criteria for a “highly successful” or “outstanding” rating. As recommended in the audit, AEP intends to build upon its efforts by continuing outreach programs to identify and locate diverse suppliers for future procurement opportunities, promoting and recognizing supplier diversity efforts internally, and continuing to build relationships with groups such as the Women's Business Enterprise National Council and National Minority Supplier Development Council. Our goal in the 2012 SBA audit is to achieve an "outstanding" rating.

AEP formed its first Diversity Council in 1998. 33 percent of AEP employees are minorities and/or females.