AEP’s New Strategic Goals & Initiatives

Goal: Aggressively pursue a superior customer experience and sales channel expansion

Initiatives: We will understand our customers’ needs, enhance every touchpoint they have with AEP and develop new communication and marketing channels (web-based, text, etc.) to deliver a superior customer experience. A diverse team, led by our Chief Customer Officer, is developing an integrated customer experience strategy that will include product and service offerings for all types of customers.

For example, we are developing a customer mobile app that will make it easier for customers to interact with AEP, when and where they want to do so, 24 hours a day/7 days a week. We are using data analytics to learn more about each customer segment – what they want, need and value most. Using this information, we will deploy new technologies, programs and services, as well as standardized best practices to deliver an exceptional customer experience and boost customer satisfaction.

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Goal: Grow our regulated utility infrastructure investment

Between 2017 and 2019, AEP plans to invest about $17.3 billion in capital to modernize and make the electric system more reliable, resilient and secure, end to end.

Initiatives: We will grow our regulated transmission and distribution investments, including building upon our success in investing in transmission projects outside of our service territory. This includes replacing aging infrastructure, establishing standards and continuing to implement a modern grid that can incorporate distributed energy resources and real-time digital technologies, such as Volt VAR Optimization (VVO), electric vehicle charging stations and energy storage. Distributed technologies deployed for system and community benefit can create a new platform for offering customer-focused products and services.

Between 2017 and 2019, AEP plans to invest about $17.3 billion in capital to modernize and make the electric system more reliable, resilient and secure, end to end. Of this, approximately $9 billion will be spent on transmission to address aging infrastructure, improve local reliability, relieve congestion on existing lines and enable the growth of distributed generation technologies and renewable resources.

Through subsidiaries such as Transource Energy, we are well-positioned to meet our goal to expand our transmission investment outside of our traditional service territory. So far, the joint ventures we have developed enabled us to expand our footprint to 13 states with projects under development in two additional states.

In 2016, PJM awarded Transource the first competitive market efficiency project, expected to be built by 2020. In the past few years, Electric Transmission Texas LLC (a 50/50 joint venture between subsidiaries of AEP and Berkshire Hathaway Energy) expanded its commitment to renewable energy by interconnecting Texas wind and solar farms to the grid between Laredo and the Rio Grande Valley, as well as in west Texas. In 2016, the Lower Rio Grande Valley 345-kV transmission line was energized, allowing for the permanent interconnection of approximately 800 MW of wind energy projects in that state.

Aging infrastructure and the risk it poses to grid reliability are major drivers of our investment strategy. In early 2017, the PJM Interconnection, a regional transmission organization, approved additional projects to improve service reliability in Indiana, Kentucky, Ohio and West Virginia. These are among many projects across our service territory to modernize the grid and improve reliability for customers.

Goal: Pursue resource transition investment opportunities

Initiatives: We are moving from a historically coal-heavy generation mix to a more diverse resource portfolio to meet the energy needs of our customers. Our intent is to own more universal-scale renewables both in our regulated energy companies and through long-term contracted renewables. Our competitive renewables businesses – AEP Renewables and AEP OnSite Partners – plan to invest up to $1 billion in contracted renewables during the next three years. We will also invest approximately $500 million in renewable wind and solar in our vertically integrated utilities. Today, approximately 10,000 MW of renewable energy is interconnected to AEP’s transmission grid, delivering clean energy across the U.S.

As the grid changes, our resource planning process is changing with it. Once dominated by coal-fueled generating capacity to meet demand, today’s AEP’s resource plans are now largely composed of wind and solar with some natural gas capacity. We are also reducing risk and volatility of future earnings by exiting the merchant generation business and focusing on our regulated business. By developing integrated generation, transmission, distribution and energy storage solutions, we can compete for new business opportunities to partner with our customers.

Goal: Develop targeted strategic relationships and partnerships (technology, services)

Initiatives: We want to leverage the many relationships we have with other companies and customers, as well as build new partnerships, joint ventures and other collaborations to continue to transform AEP into the energy company of the future. These relationships will help advance our investments in technologies, renewables and infrastructure, in ways that grow earnings, enhance the customer experience and engage our employees. We are also working with municipalities and electric cooperatives to see how we can build renewables or transmission together. Strategic partnerships, such as with Braemar Energy Ventures, Innovari, Tendril, Greensmith, and Great Plains through our Transource transmission business, allow us to enhance system efficiency, improve our communities and be the trusted energy advisor our customers want us to be. We are also building upon our relationships with regulators as we work with them to change the rules to support the pace of change that customers are requesting.

Our new strategic goals and initiatives give us the focus to become the premier regulated energy company we aspire to be. At the heart of all we do is the customer experience. Our goals and initiatives will enable us to better serve our customers and shareholders and make the shift to clean energy while we modernize the grid and integrate new technologies.

We are working with regulators to develop a revenue model that supports this new paradigm and allows us to compete for new business opportunities, inside and outside of our traditional service territory. As we execute on our plan, we are also taking time to consider what comes next.