AEP launched an initiative called gridSMART^SM in 2007. It is designed to give customers greater control over their energy usage and ultimately their bills; improve the efficiency of the electric grid; reduce overall demand, energy consumption and emissions; and improve customer service and internal efficiencies. The technology is still in the pilot stage, but we expect to achieve all of our goals once it is fully deployed.

The initial gridSMART pilot began in 2009 in South Bend, Ind., and confirmed much of what we expected. Among the major insights we learned:

• The technology that allows AEP to manage its grid from our back office systems, such as billing, to the meter and distribution field equipment works. But the technology that goes beyond the meter into the customer’s home is still evolving.
• Customers who participated in the time-of-day rate plan did shift their demand to different times, as expected.
• Cost savings from better system management, fewer crew trips, reduced fuel consumption, better theft detection and streamlined billing are being achieved.
• During the cooling season, customers who volunteered allowed us to raise the temperature in their homes using a programmable, communicating thermostat, demonstrating that we can control customer usage directly between the meter and the home through wireless technology.
• More education of consumers will be needed in future projects.

The year-long South Bend pilot involved approximately 10,000 meters and was to end after the 2009 cooling season, but it has been extended to include the 2010 cooling season because of some early technical problems.

A larger and more comprehensive gridSMART^SM demonstration project involves 110,000 customers in central Ohio. Paid for in part with a $75 million grant from the DOE, the $150 million project will include smart meters, distribution automation equipment to better manage the grid, community energy storage devices, smart appliances and home energy management systems, a new cyber security center, PHEVs, and installation of utility-activated control technologies that will reduce demand and energy consumption without requiring customers to take action.

This technology is known as integrated voltage/VaR control, a form of voltage control that allows the grid to operate more efficiently. By controlling voltage more accurately, we estimate that we can reduce demand by approximately 2 to 3 percent, and energy that is needed to serve existing customer loads by 3 to 4 percent. This allows us to achieve both demand and energy reduction goals.

Meter installation began in December 2009, and installation of utility-activated voltage/VaR control technologies and distribution automation equipment will begin this year.

Working with major appliance manufacturers, we are also testing smart appliances – devices that react to signals from the grid about price and demand – in our Dolan Laboratory in Groveport, Ohio. In the Ohio pilot, we will deploy smart appliances in select homes to determine how they work. Based on the parameters that the homeowner sets, the dishwasher may not run until 7 p.m., after the demand for power has decreased, or the refrigerator may postpone a defrost cycle until the evening, when demand – and prices – are lower. Smart appliances have the potential to help residential customers save energy and money and for utilities to save fuel and reduce emissions.

PHEVs, which many expect to be widely used in the future, also will be part of the Ohio pilot. We will operate 10 PHEVs in the pilot area to determine how their charging characteristics might affect the grid. One challenge for widespread use of PHEVs is ensuring that electricity will be available when needed to recharge vehicles and that the grid will respond to the increased load.

Public Service Company of Oklahoma has been awarded an $8.75 million low-interest loan from federal stimulus funds to begin a gridSMART pilot in 2010.

The Public Utility Commission of Texas enacted an advanced meter rule in 2007 that allows utilities to recover the cost of installing smart meters. AEP Texas filed a plan in 2009 to replace its 1 million meters by the end of 2013 and recover the costs through an 10-year surcharge.

The Texas project will allow customers to view their energy usage in 15-minute increments through a website. It also will facilitate remote connects and disconnects and provide faster notices of outages.

Our gridSMART initiatives support our goal to install 5 million smart meters in our service areas by 2015. This goal will be impossible to achieve without regulatory support in all states. However, we believe this initiative is critical to modernizing the electricity delivery system, reducing demand and changing how customers use electricity. Therefore, we will continue to deploy these technologies where regulators are supportive.