Reliability Investments

Maintaining the approximately 264,000 miles in our transmission and distribution network comes with an array of challenges while we are upgrading the infrastructure to meet modern day needs. These challenges include the age of our infrastructure, the threat of external interruptions, the transformation of our generation fleet, the difficulty of siting new facilities, new and future environmental regulations, and the magnitude of investments needed. In response, we are investing in infrastructure and using technology and data analytics to predict, prevent and mitigate service disruptions and to better communicate with our customers.

Managing vegetation on our rights-of-way is a key to maintaining transmission and distribution system reliability.

Vegetation-related outages and equipment failures are among the biggest challenges to AEP’s service reliability. Managing vegetation on our rights-of-way is a key to maintaining transmission and distribution system reliability. AEP manages the trees and vegetation around power lines using a combination of performance-based (such as targeting low-performing circuits) and cycle-based maintenance strategies. Maintaining a regular tree-trimming cycle is a significant expense that directly affects customer bills and satisfaction.

During the past six years, AEP has invested more than $1.82 billion in vegetation management, including $328 million in 2016. The issue of reliability has prompted several states to consider or implement shorter intervals between tree trimming programs.

Severe weather events have made it clear that electric distribution and transmission systems need to be made more resistant to damage from vegetation during major storms. Over the past several years, our operating companies have received approvals from state commissions in Virginia, West Virginia and Kentucky to implement more aggressive vegetation management programs, moving tree-trimming and other vegetation management to three- four- or five-year cycles, to lessen future storm impacts. Four-year vegetation management cycles have already been established in Oklahoma and Ohio.

At the end of 2016, Appalachian Power (APCo) filed a request with the Virginia State Corporation Commission seeking approval of a new accelerated vegetation management program in the Commonwealth. The proposal follows a successful three-year, 30-circuit pilot program in Virginia that reduced vegetation-related outages by 30 percent to 60 percent when compared to previous years. If approved, the proposal will enable APCo to accelerate its vegetation management operations and ultimately achieve a four-year cycle of effectively clearing every distribution circuit in its Virginia service territory.

With much of Virginia’s service territory sparsely populated and characterized by dense vegetation and mountainous terrain, the program will help enhance power quality, reduce service interruptions and reduce the time needed to restore power in the event of widespread storms and tree-related outages.

Also, in April 2017, Kingsport Power Company (d/b/a AEP Appalachian Power) filed for regulatory approval of funding that would move our Tennessee service territory to a four-year vegetation management cycle, as well as for investments in distribution infrastructure.

Grid Assurance

The most reliable grid is a resilient grid. An important line of defense for AEP and the electric power industry in securing a resilient grid is to have access to critical spare parts inventory. In 2016, six energy companies officially launched Grid AssuranceTM, an independent company providing spare parts for critical transmission equipment. AEP is one of the founding members of Grid Assurance, along with affiliates of Berkshire Hathaway Energy, Duke Energy, Edison International, Eversource Energy and Great Plains Energy.

Grid Assurance will expedite responses to major events that damage the power grid – naturally or intentionally – by giving transmission owners faster access to long-lead time critical equipment necessary to recover from catastrophic events. Some transformers can take up to 18 to 24 months to build and deliver. In 2016, Grid Assurance received final approval from the Federal Energy Regulatory Commission.

Grid Assurance complements existing sparing programs at individual energy companies as well as the Edison Electric Institute’s existing Spare Transformer Equipment Program, which can provide utilities access to transformers after a presidential declaration of a national emergency caused by terrorism.

Aging Infrastructure

Improving reliability includes rebuilding or replacing aging infrastructure. With much of AEP’s power grid decades old and, in some cases, nearing the end of its life expectancy, we are making significant investments to address aging infrastructure, which is more prone to failure. As the largest transmission operator in North America, the cost and scale of this is daunting. During the next three years, AEP alone intends to invest $9 billion in grid modernization.

According to the U.S. Department of Energy, weather-related outages disrupt lives and cost the economy an average of $18 billion to $33 billion each year (and far more during years with major storms like 2012's Superstorm Sandy). By strengthening and adding resiliency to our power grid, we help our customers weather the storm and recover more quickly.

In 2016, AEP Transmission invested $2.3 billion in new and modern infrastructure to improve reliability for customers. For example, at the end of 2016, AEP Oklahoma Transmission Company completed a three-year, 80-mile transmission line rebuild – an estimated $90 million investment. The upgraded 138-kilovolt (kV) line served three local utilities, including AEP’s Public Service Company of Oklahoma (PSO), and Western Farmers Electric Cooperative.

Known as the Lone Oak Broken Bow Project, this upgrade replaces a 1940s-era system, allowing for more efficient and reliable power flow. AEP Oklahoma Transmission Company worked collaboratively with PSO, Western Farmers and Southwest Power Administration to ensure minimal impact to our customers and the environment. Reliability improvements include the addition of modern switching gear to improve service restoration during outages, fiber communication to control the switches remotely and new steel structures that will replace the aging wood structures.

Reliability can also be impacted when there is congestion on the system. Just as our highways become overcrowded, so do the country's transmission corridors. When load exceeds line capability, breakers open to protect the equipment, and outages or brownouts occur. An overstressed system is at risk of a cascading failure, such as the one that caused the great Northeast Blackout of 2003.

The newly energized 500-kV and 765-kV yards at the Cloverdale Station in Roanoke, Va., are part of an estimated $237 million investment for a mega-station that helps address congestion in the PJM Interconnection, the regional transmission organization that oversees bulk electricity in that region. The project includes construction of structures and lines connecting three yards at the site, which will deliver more power to the region, relieve congestion on the grid, address voltage and thermal concerns, and improve the transfer of power across the grid. The 36-mile interconnection between Cloverdale and Dominion Virginia Power’s neighboring station also delivers more power between the two utilities.

But the new construction and reliability upgrades are only part of the story. The Cloverdale project will generate about $900,000 in tax revenue in the next fiscal year – about $400,000 more than expected. The increase in personal property taxes is also $78,000 higher than original estimates. These projections resulted in local recommendations to propose pay raises for state police and to make much-needed improvements to emergency medical services. The investments we are making support grid modernization and customer reliability, including reconductoring or rebuilding segments of lines; replacing poles; adding lines on existing structures; expanding, relocating or reconfiguring stations; updating telecommunications technology; replacing old station equipment; and improving cyber and physical security.