Regulatory and Public Policy
The energy industry is one of the most highly regulated sectors of the U.S. economy and is in the midst of a technology and innovation revolution. Advances in technology are creating opportunities for AEP to integrate and modernize the grid – making it smarter, more reliable and more resilient. With a smarter grid, our customers are empowered to actively engage in their energy experience – giving them more control over how and when they use energy.
To meet our customers’ evolving expectations, we sometimes must reshape the regulatory compact. AEP’s footprint includes 11 states with varying regulatory frameworks that are primarily governed by state legislatures who set policy goals, which result in regulations created by state regulatory commissions. These state legislative and regulatory environments work in conjunction with federal policies to define the parameters of AEP’s business and planning models. They also affect a utility’s business decisions related to making investments and influence how the utility is able to recover the costs of its investments.
Our priority is to maintain and operate a safe and reliable grid that is resilient and adaptive. Our generation, transmission and distribution system investments directly affect our customers and shareholders. These investments must coexist with regulation and policy considerations, such as environmental requirements and affordability. As our generation portfolio becomes more decentralized and the company transitions to more renewables and distributed energy resources, it is imperative that regulations evolve to meet the demands of today’s emergent technologies and customer preferences. We must perform this transformation in a reliable and deliberate manner for our customers while managing the financial risk for our shareholders.
One approach includes identifying flexible or alternative ratemaking models that allow AEP to accelerate the conversion toward beneficial electrification and the company’s transition to cleaner energy sources while also providing more timely cost recovery of investments. Alternative ratemaking models help balance different objectives to provide both incentives for cost savings and reinforce investments that provide value to customers and support policy objectives. These alternative models can give utilities the ability to explore new and evolving technology solutions as they determine what delivers the best value for our customers today and in the future.
Our partnerships with regulators, private and public organizations and stakeholders are imperative to meeting customer demand for new, innovative solutions. We leverage our expertise and experience to educate regulators and key stakeholders about emerging technologies and associated issues.