Energy efficiency is often viewed as one of the most important fuel sources of the future. Increasing the efficient use of energy would contribute to achieving climate change reduction targets, help delay the need to build new generation and reduce environmental impacts. AEP has increased its commitment to energy efficiency in the last three years, partially a result of input from stakeholders and support from regulators and customers.

We set an internal goal to reduce 1,000 MW of demand and 2,250,000-megawatt hours (MWh) of energy consumption on our system by the end of 2012 through, demand response and energy efficiency programs. Between 2008 and 2010, we achieved approximately 400 MW and 1,116,000 MWh of demand and energy consumption reductions, respectively. Subject to regulatory approvals and continued customer interest in our programs, we expect to surpass our energy reduction goal.

These efforts are reflected in the growth of our investments in energy efficiency during the past several years. In 2008, we invested nearly $13 million in energy efficiency and demand response programs. In 2010, we invested approximately $70 million in these programs that are now in place throughout most of our service territory, and we expect they will continue to grow.

After completing market studies in most of our service territories, we have designed a variety of energy efficiency and demand response programs and/or tariffs tailored to our residential, commercial and industrial customers.

Partly as a result, energy efficiency continues to gain momentum. For example, in late 2010 the Arkansas Public Service Commission issued 10 orders related to energy efficiency, including recovery of costs. This outcome was the culmination of nearly a yearlong process to foster the growth of existing “Quick Start” programs into longer-term “Comprehensive” programs. We view these regulatory actions as a positive and necessary step to expand energy efficiency and demand response programs in Arkansas.

In addition to the energy efficiency and demand response programs being implemented by AEP’s operating companies, we are also active in research and development projects. For example, SWEPCO, Public Service Company of Oklahoma (PSO) and AEP Ohio are participating in a demonstration project, led by the Electric Power Research Institute (EPRI), to install, monitor and report on leading-edge energy efficiency technologies.

A total of six technologies are being reviewed by EPRI, including variable refrigerant flow in heating and cooling applications, data center improvements, LED lighting, ductless heat pumps, heat pump water heating, and hyper-efficient appliances. PSO and AEP Ohio are hosting outdoor LED lighting projects in Broken Arrow, Okla., and Canton, Ohio, respectively. SWEPCO is hosting EPRI's hyper-efficient appliance demonstration project in Longview, Texas. These projects will be evaluated for overall effectiveness, customer satisfaction and other benefits.

We believe we increase our effectiveness by working with others who share our aspirations. We formed an external Energy Efficiency Advisory Council last year comprising 13 organizations, including the U.S. Green Building Council and Alliance to Save Energy, Natural Resources Defense Council and the Association of Home Appliance Manufacturers.

Installation of 110,000 advanced electricity meters by AEP Ohio, will include “smart” appliances, secure integrated smart grid technology to reduce demand and improve the efficiency of the grid.