Corporate Strategic Goals & Initiatives - 2017 progress

Goal: Aggressively pursue customer experience and sales channel expansion

To achieve AEP’s strategic goals we need a high level of employee engagement to transform our business, continuous improvement and a commitment to Zero Harm.

Initiatives: We are implementing our customer experience roadmap and have committed significant capital investments to deliver exceptional service to our customers. By engaging with our customers, we have a better understanding of their needs. We are working to enhance every touchpoint they have with AEP, developing new communication and digital marketing channels to connect with them. A diverse team, led by our Chief Customer Officer and Customer Experience Board, is implementing an integrated customer experience strategy that includes development and delivery of energy solutions and services for all types of customers. This includes the addition of a Social Media Listening & Response Center, technology upgrades for our customer operations centers and new training to empower employees to meet and exceed customer expectations.

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Goal: Grow our regulated utility infrastructure investment

Initiatives: We will continue to grow our regulated transmission and distribution investments and expand beyond our traditional service territory through investments in competitive transmission projects. Investments in our core, regulated businesses to enhance service to customers support our strategy to modernize the power grid while delivering cost-effective, reliable energy. At the same time, we are hardening the system to improve resilience.

Between 2018 and 2020, AEP plans to invest about $17.7 billion in capital (excluding Wind Catcher) to modernize and make the electric system more reliable, resilient and secure.

Grid modernization initiatives include replacing aging infrastructure based upon condition, performance and risk and continuing to make investments that optimize the use of the grid, and enabling the integration of distributed energy resources and real-time digital technologies, such as Volt VAR Optimization (VVO), electric vehicle charging stations and energy storage. Distributed technologies deployed for system and community benefit can create a new platform for offering customer-focused energy solutions and services.

Between 2018 and 2020, AEP plans to invest about $17.7 billion in capital (excluding Wind Catcher) to modernize and make the electric system more reliable, resilient and secure. Of this, approximately $3 billion per year will be invested in transmission to address aging infrastructure, improve local reliability, relieve congestion on existing lines, and enable the growth of distributed generation technologies and renewable resources.

Through joint ventures such as Transource®, a partnership to invest in competitive transmission projects, AEP is well-positioned to expand transmission investment outside of our traditional service territory. So far, these joint ventures have enabled us to expand our transmission footprint to 13 states with projects under development in two additional states.

Goal: Pursue resource transition investment opportunities

Initiatives: Making the transition to a balanced, diverse portfolio will help mitigate risk for our customers and shareholders, ensuring a more resilient and reliable energy system in the future. We are doing this through our regulated utilities and through company-owned and long-term contracted renewables. Our competitive renewables businesses – AEP Renewables and AEP OnSite Partners – plan to invest up to $1.2 billion in contracted renewables between 2018 and 2020. By 2030, our current integrated resource plans project we will add more than 8,000 MW of wind and solar to our regulated portfolio. Between 2018 and 2020, we will invest approximately $500 million in renewable wind and solar in our regulated utilities. These plans will evolve and investments are subject to regulatory approval. Today, approximately 11,900 MW of renewable energy is interconnected to AEP’s transmission grid, delivering clean energy across America.

AEP has proposed the $4.5 billion Wind Catcher Energy Connection project, which includes a 2,000 MW wind farm in the panhandle of Oklahoma that will be the largest wind farm in the United States. Wind Catcher also includes construction of an approximately 350-mile dedicated generation tie line to the Tulsa area, where nearly 9 million megawatt-hours of new, low-cost wind energy per year will be delivered to more than 1 million customers in four states. Regulatory review of this project is well underway. If approved, Wind Catcher would accelerate the addition of 8,000 MW of renewables in our regulated utilities.

As the grid changes, our resource planning process is changing with it. Once dominated by coal-fueled generating capacity to meet demand, today’s resource plans are now largely comprised of wind and solar and natural gas generating resource investments. We have significantly reduced our business risk and the volatility of future earnings by exiting the merchant generation business and focusing on our regulated business. By developing integrated generation, transmission, distribution and energy storage solutions, we can compete for new business opportunities to partner with our customers.

Goal: Develop targeted strategic relationships and partnerships (technology, innovation, workforce)

Initiatives: Preparing for the future is as much about the relationships we have today as it is our mindset for embracing change. Targeted partnerships allow us to leverage the skills and technologies of others, giving us an efficient way to stay close to emerging technologies and team up with others for the benefit of our customers. In addition, strategic partnerships help us to advance innovation and prepare our workforce for the future.

In 2017, we launched our first enterprise-wide innovation challenge, and we are creating organizational processes focused on accelerating new customer products, services and digital capabilities.

For example, we partnered with Singularity University (SU) to sponsor the Smart Cities Accelerator in Columbus, Ohio, to drive innovation and entrepreneurship to transform the smart city of the future. The SU Smart Cities Accelerator supports local start-ups focused on mobility, connectivity, data and analytics, infrastructure and energy and manufacturing and production. One of the ideas that came out of AEP’s enterprise-wide innovation challenge in 2017 was submitted to the Smart Cities Accelerator for development. The electric vehicle (EV) subscription program will increase mobility, especially in underserved neighborhoods, as well as help to establish EV infrastructure.

We have many targeted partnerships to help advance technology to improve operational efficiency and the customer experience. For example, we invested in Greensmith Energy to grow grid-scale energy storage systems. In 2017, AEP and Greensmith teamed up to pair advanced energy storage technology with two hydro plants in southwest Virginia to provide ancillary services to the grid. The integration of energy storage with hydroelectric power plants is seen to be the world’s first hybridized system of its kind to provide those services to the PJM frequency regulation market. The system is due to come online in 2018.

As we redefine the future of energy and develop innovative solutions, we cannot continue doing business as usual. We are defining AEP’s future in two ways: Updating the tools and technologies we use and helping our employees prepare through strategic work planning. In 2017, we completed a project to look at what the future of work will be and how to get the work done. We are taking what we learned and developing a strategy for a digital future – changing how we organize, behave and operate to best serve our customers.

We are also working with regulators to develop a model of utility involvement and participation in customer technology advances that supports this new paradigm and allows us to compete for new business opportunities, inside and outside of our traditional service territory. In addition, we need changes that allow us to respond more quickly and efficiently to customer desires for their energy supply needs.