AEP Sustainability - Regulations

Environmental Regulations

At AEP, noncompliance is not an option. We are committed to complying with all applicable environmental regulations and being good stewards of natural resources. To help us achieve operational excellence, we push ourselves toward prevention, accountability, engagement and continuous improvement.

One way we check on our own compliance is through internal audits which provide additional focus on controlling risks and providing assurance.

The primary federal statutes we are subject to include the Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act, Endangered Species Act and Safe Drinking Water Act. Environmental regulations developed under these laws are revised periodically, and it is critical that we stay current with changes to ensure we remain in compliance. As the scope and stringency of environmental regulations evolve, we face technical, operational and financial challenges that are common for our industry. These challenges include uncertainties with timing, scope and magnitude of future environmental regulations, which influence our decisions to upgrade or retire generating units. They also affect the planning process for new generation and transmission projects across our industry.

We actively participate in the development of regulations at the federal, state and local levels to ensure that new requirements are achievable, based on sound science, consistent with statutory authority and balanced with other rulemakings. New requirements should also consider the cost of compliance for customers and allow sufficient time for compliance.

For full disclosure on regulations affecting AEP, please read our 10-K.

Long after we retire plants, our responsibility to environmental compliance continues for requirements that remain in effect at AEP-owned properties. This includes many existing state environmental requirements, in particular those related to the management of water and coal-combustion residuals. We continue to work closely with regulators and our local communities as we move through the decommissioning process.

Environmental Compliance

Our facilities are subject to a variety of environmental, regulatory and permitting requirements at the federal, state and local levels with which we must comply. Our goal is zero – zero violations of environmental regulations or laws and zero enforcement actions. We are subject to routine environmental inspections of our facilities through scheduled and unannounced visits. During these visits, regulators inspect physical facilities and monitor our compliance with regulatory requirements, permit limits and recordkeeping obligations.

Whenever agencies identify concerns, we work with them to address those issues in a timely fashion. This could include identifying and implementing any corrective measures needed to mitigate future risks.

One way we check our own compliance is through internal environmental audits. Audits provide additional focus on controlling risks and providing assurance that robust compliance processes are developed and implemented systemwide. In 2019, we conducted internal audits of environmental programs at 54 locations.

Environmental audits reveal potential gaps in performance that are related to regulatory requirements and company policies and that require remediation. These could include areas such as recordkeeping, inspection criteria, training topics, and equipment configuration. Auditors also recognize practices that go beyond regulatory requirements to bring about robust and sustained compliance. Although reports are site-specific, we aggregate and share results and best practices across our entire system to improve performance throughout AEP.

Environmental Performance

AEP’s Generation business unit has long used metrics to encourage self-reporting of events and to improve environmental performance. Our Environmental Performance Index (EPI) includes annual goals related to opacity, water discharge permits and oil and chemical spills. The EPI helps to keep prevention front of mind, encourages sharing of best practices and drives us to be more proactive in protecting the environment. Reinforcing its importance, we tie our Generation group’s incentive compensation to EPI performance.

We set annual targets focusing on continuous improvement as we strive for zero enforcement actions and zero events. In addition, AEP’s Generation organization instituted an Environmental Good Catch program, similar in manner to our Safety and Health Good Catch program. A “Good Catch” is an observation or recognition of a condition that could lead to a reportable environmental event and the subsequent actions taken by employees to correct the situation, preventing the event from occurring. This demonstrates AEP’s commitment to an engaging and accountable culture – using knowledge sharing and lessons learned to prevent future non-compliance events.

Environmental compliance is a high priority for the lifecycle of every project we undertake. In our Transmission business, where a great deal of construction is taking place, project teams must complete a mandatory environmental compliance-training program. Our environmental specialists and engineers also provide support to ensure we achieve full compliance with environmental permit requirements. Our compliance record is excellent, especially given the scale of our business operations and we are always striving to do better.