We set the same expectations for the safety and health of our contractors as we do for our employees, and we continually challenge them to improve. Our contractors’ safety can affect our risk profile and the company’s reputation.

Three AEP contractors were fatally injured while working for AEP in 2011. One contractor died when a work boat capsized on the Mississippi River, a second died while working for our Transmission business unit, and a third was fatally injured while trimming trees in Kentucky. This is not acceptable, and we continue to focus our efforts on preventing fatalities.

We set an overall recordable injury rate for contractors in 2011 of 1.70 and a rate of 1.52 was attained, better than target.

We established a contractor Path to Excellence in 2011 that sets recordable injury rates through 2015. The proposed target for 2012 is 1.60. All of our major contractors performing construction, maintenance and other physical work have their performance tracked each year.

For the first time, targets were established in 2011 for contractors serving individual organizations within the company. For example, the EP&FS organization, which manages all large construction projects, set a contractor recordable target rate of 1.17 and contractors within that unit outperformed it. Transmission and Distribution line and forestry contractors, as well as those in the Fossil & Hydro unit, all outperformed their 2011 goals.

We can’t specifically predict how our use of contractors may change as our business transforms. Additional major construction projects requiring contractor labor are likely as more coal units are retrofitted or upgraded with new pollution controls. Our experience will guide us in how we manage it. We had as many as 8,000 contractors on site in the recent past while many simultaneous environmental projects were under way.

In EP&FS, our contractors have one safety coordinator on site for a predetermined number of workers, based on the specific work being performed and experience. This coordinator works under the direction of AEP’s Safety and Health team, and follow-up audits are done to ensure that procedures are being followed. AEP’s Transmission business unit has significantly increased construction activities as that business grows. To ensure the safety of the work, Transmission requires contractors to assign a safety and health professional onsite when we ask them to do so. In addition, Transmission has located eight safety and health professionals across its service territory to independently monitor construction activities.

Another way we are working to raise awareness among contractors and vendors is through development and inclusion of standard safety and health requirements that are included in contract and purchase order terms and conditions for Fossil & Hydro and EP&FS units. This is intended to ensure that prescribed controls for safety are consistently followed. For example, the guidelines for delivering chemicals and other commodities to our power plants are described within the terms and conditions of the contract or purchase order. Transmission also has supplemental terms and conditions with its contractors to set clear safety and health expectations that must be met when working on transmission projects. We also use this Corporate Accountability Report to communicate our expectations about safety and we hold an annual contractors’ safety summit.

Many of the contractors who work for us also perform work for other utilities. And each company has its own safety culture, rules and expectations. Our industry is working on a universal contractor policy and guidelines through the Edison Electric Institute (EEI), the trade organization for investor-owned utilities. We have been working with EEI on this for the past three years, and the EEI plan that is scheduled to be implemented soon features significant AEP input. Once implemented, these guidelines will level the playing field and help contractors comply with policies and procedures that are universal to the industry.

Contract crews install switches on AEP lines as part of the Ohio gridSMART® project. Contractors make up a significant portion of the work force in our major business units. We track and report the safety performance of major contractors who perform construc-tion, maintenance and other physical work for the company.