Now, more than ever, our stakeholders want a voice in determining the future of energy and our company. These stakeholders include our employees, our customers, our investors and the communities in which we operate. We also engage “shapeholders” – those who don’t have a direct stake in our success, but exert significant influence over our business. These include industry groups, policymakers, consumer advocates, professional associations, non-governmental organizations (NGOs), thought leaders, utility peers, and the media.
When we talk to our stakeholders about sustainable electricity, they ask us about resource diversity, advanced technologies that enable energy efficiency, distributed resources, and regulations and public policies that could affect future operations or investments. They also want to know our plan for smart, modern infrastructure that informs and empowers customers and creates a more resilient and robust system. Across the board, the question we are asked most frequently is whether we are sufficiently prepared for the transition to a cleaner energy economy.
AEP’s customer-centric culture includes a commitment to better anticipating and serving their needs. By engaging with our customers, we can identify energy solutions that help them save money, use energy more efficiently, and achieve their own energy and sustainability goals. Customers are also an important voice to bring into the conversation with policymakers, as we design and seek approval for investments to realize a cleaner energy future and advance innovation and technology.
In May 2018, we convened a customer meeting featuring a two-way dialogue about potential solutions to enhance the customer experience. We not only strengthened our relationships with customers, but also learned about the issues they care about most. Additionally, we met with customers at the Renewable Energy Buyers Alliance and through our work with the World Resources Institute’s (WRI) Clean Power Council. These interactions focused on opportunities for co-creating solutions to meet customers’ business needs. Many customers share AEP’s vision for a clean energy future and have goals for carbon reduction and renewable energy, and they are looking to us to help them meet their goals.
To deliver solutions that meet customers’ needs, we are leveraging both our regulated and competitive businesses. We bring our whole team to the table, recognizing that being flexible can mean the difference between a satisfied customer and a missed opportunity. This gives us greater flexibility to deliver on customer expectations. For example, several large customers contacted AEP after hearing of our new carbon reduction goals. They wanted to learn more about potential opportunities to work together since they have similar goals.
In addition, we are actively engaged with the Edison Electric Institute’s (EEI) Customer Solutions Advisory Group, which meets with large customers regularly to understand their concerns and issues and collaborate on solutions. The group is made up of EEI utility members and large commercial and industrial customers. One pain point identified through both the EEI group and the Clean Power Council is the need for timely greenhouse gas emissions data to help customers more accurately calculate their carbon footprint. EEI and WRI have teamed up to develop a template for providing customers this data, which will be piloted in 2019. AEP is also working to make it easier for customers to gain access to more timely information.
From hosting open houses and gathering public input about new transmission projects to developing a resource plan that meets a community’s energy and capacity needs, AEP is committed to being open, accessible, honest and responsive. To us, it’s all about relationships. Community and landowner involvement is very important to AEP where significant investment in critical electric infrastructure is vital to the communities we serve.
AEP Transmission’s project outreach team uses open house events, interactive project websites, visual simulation, fact sheets, direct mail and other proactive tools to gather input and work with stakeholders. This proactive approach promotes transparency and two-way communication, ensures compliance with laws and regulations, and gives directly impacted property owners and communities a voice throughout the process. In 2018, project outreach specialists supported 514 projects across AEP’s system and hosted 32 community open house events. We engaged one-on-one with landowners to acquire more than 5,300 easements for transmission rights-of-way, which translates into more than 80,000 interactions with directly-involved property owners.
In late 2018, Indiana Michigan Power Company (I&M) collaborated with the City of Fort Wayne, Indiana, on the Spy Run Extended project to restore and enhance a transmission right-of-way that passes through a city park and along a greenway trail. This project was the final piece of the Powering Up Central project, one of five Powering Up Indiana projects to replace aging transmission infrastructure and improve reliability for customers. Thanks to a partnership between I&M and the City of Fort Wayne, we created environmentally balanced habitats in an important recreation area of the community.
Appalachian Power hosted five open houses to meet customers where they live and listen to their concerns and questions. About 350 customers in Logan, Beckley and Elkview, W.Va., Grundy, Va., and Kingsport, Tenn., took advantage of the meetings, where our employees provided information on a range of issues, including electric bills, service reliability and energy efficiency.
The universe of environmental, social and governance (ESG) ratings and rankings continued to expand in 2018, as did the demand for ESG-related information. Climate change, governance, risk and strategy continue to be the main focus; however, increasingly, investors are looking more closely at companies’ social performance to see how they are delivering profits while making a positive contribution to society. Many institutional investors issued clear intentions to consider ESG performance in their investment decisions, demonstrating the drive for more robust disclosure and engagement.
In response to this growing interest, we’ve sharpened our focus on ESG and responded to 10 ESG investor-focused surveys in 2018. In addition to the surveys, AEP published a 2018 Strategic Vision for a Clean Energy Future report, which is solely devoted to addressing climate-related risk management, scenario analysis and governance, as well as opportunities and challenges. This report provides significant additional disclosure on how AEP is managing its transition to a clean energy/low carbon future, as well as setting new mid- and long-term goals for carbon emission reductions.
Part of this engagement included a productive year-end meeting with a group of investors that was led by our CEO and Lead Director of AEP’s Board of Directors. During our meeting we shared our progress toward a clean energy future. The discussion was open and candid, and we agreed to continue the dialogue. We remain committed to engaging with AEP’s ESG-focused investors and other interested stakeholders to understand what they expect from AEP and to inform them of our progress as we execute our strategy.
As part of its oversight role, the Board monitors climate risks and reviews opportunities that may be realized with climate change and other issues, including technology changes, renewable energy and energy efficiency. As AEP continues to transition its business, the Board works with senior management to adjust plans as needed to respond to rapid change in the industry, including technology and public policy. Management identifies and incorporates significant ESG issues, including climate change impacts, into the business strategy. We believe our ESG performance is linked to our ability to create long-term value for our shareholders.
In recognition of AEP’s overall financial and nonfinancial performance and commitment to ESG, in 2018, AEP was added to the Nasdaq CRD Global Sustainability Index, one of the leading Global Sustainability Indexes. The Index measures the performance of 400 public companies executing a business strategy for shared value focused on long-term value creation, financial returns, environmental performance and positive societal impact.
AEP is also highly engaged within our industry through the Edison Electric Institute’s (EEI) ESG/Sustainability reporting effort. AEP is a member of the EEI committee that created a template to provide electric industry investors with more uniform and consistent quantitative and qualitative ESG and sustainability-related metrics. This was done in collaboration with institutional investors and ESG research organizations who specialize in asset management, ESG/sustainability, investment banking, and buy-side and sell-side research. We piloted the report in 2017 and issued the first formal report in 2018. We intend to publish this report annually. In addition, the EEI ESG Committee meets twice per year with investors to check and adjust the template, ensuring it remains relevant in today’s rapidly changing ESG landscape.
- Non-Governmental Organizations
Our engagement efforts are integral to the success of our strategy for a clean energy future. For more than a decade, we have been engaging with various non-governmental organizations (NGOs), including environmental organizations. Through our commitment to transparency, engagement, candor and honesty we have seen these relationships transform from adversarial at times to complementary and collaborative. We believe strong relationships with NGOs create better partnerships to address issues that can influence or shape our business future.
Throughout 2018, AEP engaged with numerous NGOs to seek their feedback and educate them on several important sustainability issues. We asked them for input as we developed a new stakeholder engagement strategy, and they acknowledged the value of having access to AEP leaders and commended our commitment to engagement and transparency. AEP’s sponsorship of the Electric Power Research Institute’s Electrification Conference enabled several NGOs to attend and learn about the technologies, challenges and opportunities of electrification. Additionally, Ceres, Sierra Club, Environmental Defense Fund, Natural Resources Defense Council (NRDC) and Clean Air Task Force members joined AEP executives and several large customers for an in-person meeting at the conference. We also held meetings in Columbus, Ohio, with NRDC and The Nature Conservancy. In addition, we communicated with NGOs about key events, leadership changes and updates on our clean energy strategy as they occurred.
- Clean Power Council
The World Resources Institute’s (WRI) Clean Power Council (CPC) is a two-year collaboration composed of U.S. electric utilities and major commercial and industrial customers from the technology, manufacturing, automotive, retail and hospitality sectors. The CPC is committed to the rapid deployment of low-carbon energy supply and increased use of beneficial electrification through innovative and mutually beneficial utility sector solutions. The main work streams for the group are to address customers’ needs for GHG data as well as fleet electrification opportunities. In early 2019, WRI/CPC joined with the EEI Customers Solutions Advisory Group to address the GHG need. For more information on the CPC, please visit the WRI website.