For many years, climate change has been one of the most significant sustainability issues facing AEP. One major reason is our reliance on coal. Because of the company’s proximity to the nation’s coal fields, its legacy in coal-fired generation, the expertise we developed over more than a century and the huge investments we have made, coal will remain a part of AEP’s fuel portfolio for many years to come. We are one of the largest consumers of coal in the Western Hemisphere and coal still accounts for about 80 percent of the energy that we generate. In 2010 our plants released 134 million metric tons of greenhouse gas (GHG) emissions.
  
As our nation and the world began to focus on global warming, we took steps to reduce greenhouse gas emissions, from planting millions of trees to building the world’s first carbon capture and storage validation facility at our Mountaineer Plant in West Virginia. We did this voluntarily in the interests of our business and the environment.

Our belief in the science of climate change and our position on the issue have not changed: We believe that human activity has contributed to global warming. We also support a legislative approach to dealing with this issue rather than regulation. And while voluntary activities appear to have diminished in the U.S., climate change remains an important issue for AEP that we will continue to addresss. Our challenge is that, without a legislative requirement to reduce GHGs, the state regulators who set our rates have been sending us clear signals that they will not approve rate increases to recover our climate-related project expenses. Without a market for carbon allowances, we cannot obtain early-action credit toward future emission mandates. We remain open to considering all options, but -- especially in light of the continuing economic challenges we face -- we are not likely to commit to new projects.

We remain convinced that federal legislation is the best way to address the issue of climate change in the United States. Such an approach would provide businesses with the certainty needed to plan long-term capital-intensive investments. That is why we have supported a host of bills in Congress to advance this issue on the legislative front. We don’t agree with all provisions of all bills and many stakeholders, including environmental groups and policymakers in our states, have taken issue with our approach. But we believe the path toward a workable solution includes incentives for technology development and deployment, credit for early actions and an approach that is economy-wide. This can best be achieved through legislation and not regulation under the Clean Air Act.

Without this certainty, it is impossible to justify expenditures in the billions of dollars that might otherwise put the company and its shareholders at risk. Unfortuantely, such legislation appears unlikely in this Congress.

In spite of this, we will continue to reduce GHG emissions as we replace older and less efficient generating units; transition to the use of more natural gas generation; employ more renewable forms of energy, where it makes sense; operate more efficiently and gradually deploy smart grid technology.