AEP Sustainability - Just Transition

Just Transition

More often than not, the transition to a clean energy economy focuses on carbon emissions reductions as the leading indicator of success in slowing the effects of climate change. But climate change is as much a structural change to our economy as it is an environmental issue. As we transition to cleaner forms of energy, there are impacts to people, communities and society at large that must be considered and thoughtfully managed. The low-carbon transition is a double-edge sword with lasting socio-economic effects, especially for communities dependent on the fossil fuel industry for jobs, taxes and corporate philanthropic support. At AEP, we are establishing a new model for enabling a just transition that is collaborative, inclusive and community-driven.

What is Just Transition?

Just Transition is a place-based set of principles, processes and practices to build capacity to transition from an extractive economy to a regenerative economy. To AEP, this means we are part of the capacity-building solution because when our communities are strong and thriving, we are also successful.

AEP’s Commitment

Between 2022 and 2028, AEP will retire approximately 5,300 megawatts (MW) of coal-fired generation, affecting hundreds of employees across our service territory. We have a comprehensive workforce repositioning strategy to provide support and resources to find new jobs within or outside of AEP. We are engaging with our affected communities to help identify resources available to support their diversification efforts and to research options for site redevelopment, where feasible.

The Economics

To understand the true impact of a plant retirement, we conducted an economic impact analysis in our 2021 Climate Impact Assessment. We modeled a hypothetical closure of four active coal units to see how a plant retirement would affect regional employment, labor income and GDP. While every plant will have unique impacts, this analysis provides a foundation for understanding the cumulative regional effects of a coal plant closure. According to the analysis, a typical coal-fueled power plant operated by AEP generates $160 million in regional economic activity, provides $63 million in labor income, and supports more than 700 regional jobs. There is also significant economic activity in external supply chains that support the plant. What we found was that when the plant retires, an additional two to three jobs are also lost in the region – on top of the plant jobs that are lost. Read more about this analysis in our climate report.

Economic Impact Summary - Average Effect of Coal Plant Retirement

Transitioning the Pirkey Power Plant

In 2023, the Pirkey Power Plant in East Texas, a coal-fired plant, will retire from AEP’s fleet. The plant is owned and operated by Southwestern Electric Power Company (SWEPCO). The adjacent Sabine Mine, which serves the plant, will also close. Two communities – Hallsville and Marshall – stand to lose tax base that supports local education and public services.

In May 2021, AEP and SWEPCO partnered with the Just Transition Fund to engage the communities in developing comprehensive, actionable plans to diversify the local economy. The Pirkey Transition Task Force is composed of more than a dozen local leaders and community stakeholders. They include representatives from two independent school districts, a local judge, the East Texas Council of Governments, the Greater Marshall Chamber of Commerce, the Harrison County Hispanic Lions Club, Texas State Technical College, Marshall Economic Development Corporation, and the Sabine Mine, among others. AEP and SWEPCO also participated on the Task Force. The Just Transition Fund served as a convener and facilitator. It helped the Task Force organize, identify priorities and resources, and develop a road map for economic diversification that can be carried forward. The Just Transition Fund committed six months to the Task Force, achieving the goals established at the outset.

The Task Force met biweekly to share data, identify resources, raise concerns and questions, vet ideas, and work collaboratively toward an action plan. The group began by identifying its priorities:

  • Identify good jobs for displaced workers at the plant and the mine
  • Keep families local
  • Address the tax base gap that will occur when the plant retires
  • Support economic development at the plant site and beyond

The Task Force organized community meetings in Hallsville and Marshall, giving residents the opportunity to learn about the plant and mine closure, the work of the Task Force and the vision for the communities’ futures. In addition, Task Force members attended local meetings of Rotary Clubs, Lions Clubs, and chambers of commerce to raise awareness and seek additional input.

To support communications efforts, AEP launched AEPcommunitytransition.com. It includes an episode of the AEP podcast, "Connected," that explains why AEP is transitioning to clean energy and how the company is supporting its employees and communities for future success. The website includes the schedule of planned coal-plant retirements and links to resources for communities. The Pirkey Plant’s transition work is featured on the site. The intent is to add each successive plant that will be retired from AEP’s coal fleet. This allows employees, communities and other stakeholders to follow our progress through this transition.

AEP and SWEPCO partnered with the Just Transition Fund to engage the communities surrounding the Pirkey Power Plant, which is set to retire in 2023.

Supporting Our Workforce

A Workforce Transition Team was established soon after an announcement of the pending retirement of Pirkey Power Plant. AEP management directed company leaders to interview and strongly consider qualified plant employees applying for jobs within AEP or SWEPCO. The intent was to provide as many opportunities as possible for employees to stay with the company. Among the activities the Transition Team sponsored or organized included:

  • Five voluntary career development workshops that included résumé writing, mock interviews, job market reviews, and comparisons of knowledge, skills, and abilities with the qualifications needed for technical positions within other AEP business units
  • One-on-one career counseling
  • An on-site job fair
  • Collaboration with external partners for job training programs, such as the East Texas Workforce Commission, Texas State Technical College and large employers in East Texas

Of the 106 employees at the plant when the retirement was announced, about 75% either found new positions with AEP or SWEPCO, opted to retire with the plant, or found new jobs outside of AEP. These efforts will continue until the plant is retired. The Sabine Mine, for which the only customer is the Pirkey Plant, had 162 employees facing job loss when the plant and mine close in 2023. SWEPCO continues to work closely with the mine’s leadership to support the workers as much as is practical.

When retiring a power plant, AEP hosts on-site job fairs and career development workshops as part of our efforts to support employees as they transition into new careers.

Lessons Learned

The collaboration with the Just Transition Fund and the formation of the Pirkey Transition Task Force were overwhelmingly positive. This partnership helped to ensure the Task Force was reaching the right people and hearing all voices impacted by the plant retirement, and further strengthened our relationships with our communities.

The intentional collaboration with affected communities to identify local priorities and work together toward an action plan will lead to a more diversified local economy. By bringing together a collection of community stakeholders, the Task Force was better able to understand the true impact the retirement would have on the communities. We also learned that each community has different needs and aspirations, making it important to bring as many disparate voices to the table as possible. Elected leaders alone will not sufficiently provide the balanced views; civic groups, chambers of commerce, economic development agencies, the faith community, secondary and higher education, and unions, among others are critical to the success of the process.

By the end of 2021, the Task Force had developed a high-level action plan. The group will continue to collaborate, and AEP and SWEPCO will continue to participate. Ensuring the success and economic health of our communities is in our own best interest as well. There is still a lot of work to be done to ensure this region of East Texas successfully addresses its priorities and achieves its economic growth goals. From this experience, our intent is to carry forward this community-driven, collaborative approach as AEP prepares to retire additional coal units in the years to come.

A Summary of Some Key Learnings

DataIt’s important to have accurate data on the direct, indirect and induced economic impact of a plant retirement. The plant is an ecosystem that supports the broader economy, so the implications will have a ripple effect. Differentiate what will be lost from what will remain (e.g., assets remaining in tax base). Having the data available as soon as possible is essential to understanding actual impact and what to plan for. Identify environmental justice issues that could be a factor in the decommissioning plan.
ResourcesIdentify state, regional or federal grant or economic development programs that can benefit the region. At Pirkey, a subcommittee was formed to focus on applications for federal funding. Identify external partners such as a Council of Governments, state or local workforce development organizations, and technical schools and universities.
StakeholdersMake a list of all possible stakeholders, and develop a strategy for outreach and engagement. Manage expectations. Communicate often.
OrganizationSWEPCO took the lead to establish the task force concept and recruited initial members. Task force members are needed to help expand this because they know their communities best. The leader should either be a third party outside of the process or a community leader.
CommunicationsThe Pirkey Task Force had two tracks for communications. The Just Transition Fund organized all meetings and helped to craft postcards and a community survey independent of SWEPCO. SWEPCO provided translation services and produced fact sheets, organized media outreach and established a dedicated transition website, with Pirkey being the first featured plant.