We have always encouraged our customers to use energy wisely and efficiently. But recently we have begun to look differently at energy efficiency. A decade ago, we did not view energy efficiency as a resource and did not give it serious consideration when developing our integrated resource plan. Today, we see energy efficiency and demand response as very important resources, and we have increased our commitment accordingly. Energy efficiency and demand response will become even more important in the future as regulators will want to know what we have done to delay the need to build new power plants.

Energy efficiency has been a priority for many of our stakeholders, and it was at their urging that we began to fully appreciate the need for expanding the use of this resource. Our goal to reduce demand by 1,000 MW and energy consumption by 2,250,000 megawatt hours (MWh) by the end of 2012 were driven by the ongoing discussions we have with so many of our stakeholders. These goals are reflected in our integrated resource plans, and we track and report our progress .

From 2008 through 2011, we achieved 1,972,000 MWh of reductions, reaching 88 percent of our energy target, and we are on track to meet our goal at the end of 2012. We also have achieved 716 MW, or 72 percent, of the demand reduction goal and continue to aggressively pursue opportunities to meet it as well.

Energy efficiency and demand reduction programs have received regulatory support in many of our states. This cost recovery will continue to be integral to our use of this resource in the future. Between 2008 and 2011, we invested approximately $239 million in these consumer programs. In 2011 alone, we invested more than $115 million. Going forward, we expect investments across the AEP system will continue to exceed $100 million annually, subject to regulatory approval and cost recovery.

We have made significant investments in many of our coal-fired plants to improve their efficiency to offset the energy that’s needed to run emission control technologies. This improvement reduces the energy we must produce to operate the plant’s systems and send energy into the grid. During the past four years, we also took several steps to reduce energy consumption in our office buildings and service centers. Using our 2007 electricity consumption as a baseline, we reduced our consumption by nearly 19 percent at the end of 2011, a 3.5 percent increase in energy savings compared with 2010. We achieved these results by installing energy efficient equipment and controls in facilities across the AEP system.

For example, we completed a lighting retrofit at PSO’s headquarters in Tulsa, Okla., reducing annual lighting kilowatt hour usage by about 50 percent. The AEP corporate headquarters in Columbus, Ohio, was awarded LEED Gold certification in the existing building category in May 2011 from the U.S. Green Building Council. We will continue our efforts to reduce our energy consumption through equipment upgrades and conducting walk-through energy audits of our facilities.

We participated in a transmission efficiency initiative launched in 2010 as the Electric Power Research Institute (EPRI), FERC and the transmission industry sought to develop practical designs that achieve improved system efficiency. We played a leadership role in EPRI’s program and offered four transmission efficiency demonstration projects. These included efficiency benefits of an EHV overlay to the existing grid; more efficient line conductor selection; more automated switching of equipment to manage system losses; and higher-efficiency substation transformers. The studies found significant energy and carbon dioxide emission savings can be economically achieved by implementing these options under certain conditions. The greatest opportunity among the four projects is the EHV overlay. Like reducing the traffic on a congested highway, the addition of EHV lines help to save energy compared with lower voltage solutions. The remaining projects also provided better savings opportunities.