The Centers for Disease Control (CDC) estimate that health care costs in the United States will top $2.8 trillion by 2011, fully 70 percent of which are preventable or can be reduced. AEP spent $244 million on medical benefits in 2006 – a 6.2 percent increase over 2005.

To encourage our employees and their families to take greater control over their health and wellness, AEP launched a companywide wellness program, including health screenings, personal health coaching, education programs and exercise programs. Our goal in 2008 is to have 60 percent of our employees complete a confidential health risk assessment. This gives employees information needed to make better lifestyle choices. It also tells us, on an anonymous basis, the types of health issues affecting our employees so that we can target programs and services more effectively.

AEP also partnered with the American Heart Association's START! walking program in 2007 to encourage a culture of physical activity and health through walking. The program spawned walking challenges across the company. In 2008, our goal is for one-quarter of our work force to participate in the START! heart walk.

Health and wellness include being prepared for the worst. As a regulated, critical resource provider, AEP is obligated to plan and prepare to operate during a pandemic. Our Avian Flu Task Force was formed in 2006 to address such a risk. As part of our stakeholder engagement this year, OSHA told us how important it is for the agency to know we are prepared. At the end of 2007, many AEP employees received a preparedness kit and information about what to do in the event of a widespread health emergency.

Our success as an organization depends on the knowledge, experience, diversity and commitment of our people. We rely on our employees to lead us forward in creating and deploying new technologies so we can meet our customers' needs. We have an experienced work force and we have been able to attract new employees who complement our long-term employees.

Approximately 23 percent of our workers are age 55 years or older and 18 percent are eligible to retire; we anticipate that 10 percent of our employees will retire by 2012. In order to encourage our current employees to help us transition to a future work force, we offer them a program to work part-time with benefits at the better full-time rates. This program, known as "Legacy of Knowledge," gives them greater flexibility to transition into retirement.

	Employees	Females (%)	Minorities (%)
Total Employment	21,005	4,001 (18.9%)	3,075 (14.0%)
Officials & Managers	3,358	342 (10.2%)	272 (7.9%)
Professionals	5,285	1,367 (25.9%)	734 (13.9%)

	Employees	Females (%)	Minorities (%)
Total Employment	20,541	3,892 (18.9%)	2,868 (14.0%)
Officials & Managers	3,239	307 (9.5%)	255 (7.9%)
Professionals	5,144	1,308 (25.4%)	647 (12.6%)

We have to compete more aggressively for the talent and skills we need to operate a 21st century electric utility. To this end we are developing partnerships with technical schools, colleges and universities. For example, Public Service Company of Oklahoma worked with Oklahoma State University in Okmulgee and other power generators to launch a new, two-year associate degree program in Power Plant Technology. The companies worked with the university to develop curriculum, offer internship placements and assist with recruitment. The first class began last fall with eight students. As the complexity of operating power plants increases, advanced education has become a prerequisite for even entry-level jobs.

In Ohio, AEP teamed up with Washington State Community College and other organizations to host the first ever Women in Engineering Summer Camp for high school girls. Engineering jobs are in high demand; our strategy is to develop and attract the talent we need while increasing the diversity of our employees. We also provide our beginning line mechanic training curriculum to technical schools to encourage entry into this career field.

To retain talent we have started offering back-up child care for full-time employees when their children are sick and the employee can't stay home. This program can also be used for a sick spouse or aging parents. We also offer benefits such as flexible work schedules and telecommuting.

Our continued success depends on our next generation of leaders. We have created AEP leadership development programs for employees with leadership potential, at all organizational levels. We have a week-long training program that encourages and teaches constructive candor while developing leadership skills. For the third time in two years, a group of senior executives was reassigned in a corporate succession plan that prepares them and the company for the future by broadening their leadership skills, experience and understanding of our organization.