Climate Change Data

Environmental Metrics

ESG Focus Areas

• Environmental Performance
• Safety
• Stakeholder Engagement
• Climate Change

Environmental Achievements

• Reduced or offset 31 million metric tons of CO2-equivalent emissions between 2003 and 2005.
• Anticipate that by 2010 AEP’s coal-fired NOx and SO2 emissions will be reduced by 79 percent and 65 percent, respectively, from 1994 levels. Also forecast a 55 percent decline in mercury emissions from current levels by 2010.
• Received the highest score for the electric utility industry in a Ceres ranking of 100 global companies’ climate change strategies.
• Named to the Carbon Disclosure Project’s Climate Leadership Index.

Social Achievements

• Introduced the Chairman’s Life Saving Award to recognize employee efforts in life-threatening situations.
• Honored with Edison Electric Institute’s Emergency Assistance Award for helping other utilities restore electric service.
• Named one of the nation’s top employers for people with military experience (fourth consecutive year).
• Recognized as one of the best corporations in the U.S. for women of color.

Governance Achievements

• Submitted its Annual Certification of the Chief Executive Officer to the New York Stock Exchange regarding the New York Stock Exchange corporate governance listing standards.
• Filed Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Climate Goals & Targets

Environmental Challenges

• Mild weather impacting revenues.
• Higher fuel costs.
• Lower transmission revenue.
• Regulatory and legal challenges delaying IGCC plant construction.
• Projected increases in fuel, financing and operational and maintenance costs.
• Reduced off-system sales.
• Plant availability.
• Weather.
• Wholesale market volatility.
• Fuel cost volatility and fuel cost recovery, including related transportation issues.
• Regulatory activity in Virginia, Texas, Oklahoma, Ohio and with the FERC.
• Legislative activity in Ohio and Virginia regarding the future regulatory operating environment.
• Legal proceedings regarding appeals related to Texas stranded cost recoveries.

Mitigation Strategies

• Disciplined investment in utility operations.
• Regulatory recovery on new investments, including innovative rate plans.
• Continued success in controlling costs.
• Maintaining credit quality and liquidity.
• Pursuit of favorable resolutions of pending base rate cases in Virginia, Texas, and Oklahoma.
• Influencing key legislative outcomes regarding Ohio and Virginia’s future regulatory operating environment.
• Continued proceedings before the FERC seeking proper regional transmission rates, approval of SECA rates, and approval and incentives to construct a 765 kV transmission line project.
• Request before the Public Utility Commission of Texas regarding new transmission rates and designation as a utility for Electric Transmission Texas LLC.
• Increased generation rates in Ohio and reinstated fuel cost adjustment rate clause in West Virginia.

Supply Chain Management

Climate-Related Risks & Opportunities

Awards & Recognition

• Ceres ranking (highest score for electric utility industry)
• Edison Electric Institute’s Emergency Assistance Award

Environmental Metrics

ESG Focus Areas

• Employee Safety
• Environmental Performance (Emissions Reduction)
• Sustainability
• Community Investment

Environmental Achievements

• No employee fatalities in 2008 and 2007; overall safety performance improved.
• Construction of the nation’s first ultra-supercritical, coal-fired baseload generating plant (Turk Plant) with greater efficiency and emission reductions.
• Significant progress on commitment to add 1,000 megawatts of wind generation by 2011 (only 100 MW from goal).

Social Achievements

• Community investments totaling more than $17 million in 2008.
• American Electric Power Foundation grants of more than $11.6 million in 2008.
• Addition of two new members to the Board of Directors with expertise in sustainable business practices and public/private sector experience.

Governance Achievements

• Submitted Annual Certification of the Chief Executive Officer to the New York Stock Exchange regarding corporate governance listing standards.
• Filed Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Climate Goals & Targets

Environmental Challenges

• Economic downturn impacting sales and capital markets.
• Access to capital markets to fund capital expenditures.
• Intervention by consumer advocates to keep rates down.
• Wholesale market volatility.
• Cook Plant Unit 1 outage and repair costs.
• Fuel cost volatility and recovery.
• Potential environmental legislation and regulation.
• Pending rate cases and regulatory decisions.

Mitigation Strategies

• Reduced capital expenditures by $750 million.
• Tightened controls on spending and matched capital spending to cash flow.
• Drew $2 billion on existing credit facilities.
• Aggressively seeking rate relief.
• Developing strong regulatory relationships.
• Anticipating cost recovery through insurance, vendor warranty, and regulatory process for Cook Plant Unit 1.
• Active fuel cost recovery mechanisms in most jurisdictions.
• Working with state regulators to implement programs to help customers manage electricity usage.

Supply Chain Management

Climate-Related Risks & Opportunities

Opportunities

• Development of energy-efficient products
• Carbon capture and storage
• Advanced energy storage technologies
• Demand-side management and energy efficiency measures

Sustainable Products & Innovation

• Ultra-supercritical coal plant
• Wind generation

Environmental Metrics

ESG Focus Areas

• Financial & Operational Performance
• Energy Reliability, Security & Growth
• Environmental Performance
• Global Climate Change
• Regulatory & Public Policy
• Our People
• Stakeholder Engagement

Environmental Achievements

• Reduced SO2 emissions by 73% and NOx emissions by 80% since 1990.
• Retired or plan to retire more than 5,100 MW of coal-fired capacity.
• Achieved 1,972,000 MWh of energy reductions (88% of target) and 716 MW (72%) of demand reduction goal from 2008-2011.

Social Achievements

• Recordable injury rate of 1.00 in 2011 (short of 0.97 target).
• Improved contractor safety performance, achieving a recordable injury rate of 1.52 in 2011 (better than 1.70 target).
• Provided approximately $74 million in federal and private energy assistance in 2011.
• Employees volunteered 88,323 hours in 2011.

Governance Achievements

• Integrated sustainability reporting with financial reporting for the third year.
• Achieved Application Level A validation from GRI for the fourth consecutive year.
• Strengthened balance sheet in 2011, ending the year with a debt-to-total-capitalization ratio of 55.3%.

Climate Goals & Targets

Environmental Challenges

• Aging infrastructure and the need for upgrades.
• Threat of external disruptions (e.g., extreme weather, cyberattacks).
• Need for additional capacity and difficulty in siting new facilities.
• Stringent environmental regulations and their impact on reliability and costs.
• Lack of a comprehensive national energy policy.
• Retail competition in Ohio.
• Deteriorating condition of inland waterways.

Mitigation Strategies

• Investing in transmission business ($350 million in 2012, >$2 billion in next four years).
• Repositioning generation assets for a more sustainable fuel mix (retiring coal, adding natural gas).
• Developing a robust competitive retail business (acquisition of BlueStar Energy Holdings Inc.).
• Implementing energy efficiency and demand response programs.
• Advocating for regulatory flexibility and clearer energy policy.
• Developing a modified Electric Security Plan for Ohio.

Supply Chain Management

Supplier Audits: Two surveys of coal suppliers conducted.

Responsible Procurement

• Sustainability strategy and activities considered in procurement process.

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather events (droughts, floods, tornadoes).

Transition Risks

• New environmental regulations.
• Market shifts (e.g., low natural gas prices).

Opportunities

• Development of energy-efficient products and services.
• Increased use of renewable energy.

Reporting Standards

Frameworks Used: GRI G3.1 guidelines, GRI Electric Utility Sector Supplement

Certifications: ISO 14001:2004 (printer)

Third-party Assurance: AEP Audit Services (review)

Environmental Metrics

ESG Focus Areas

• Safety
• Environmental Performance
• Energy Reliability and Security
• Innovation and Technology
• Stakeholder Engagement
• Economic Development
• Climate Change
• Resource Diversity
• Regulatory and Customer Rate Management
• Employee Culture

Environmental Achievements

• Reduced SO2 and NOx emissions by about 80% since 1990; Mercury emissions declined by nearly 60% since 2001.
• Beneficial reuse of more than 3 million tons of coal combustion products (CCPs) in 2012, avoiding more than $16.7 million in disposal costs and generating $9.6 million in revenues.
• Reduced kWh usage by 23.8 percent by the end of 2012 compared with the 2007 baseline, exceeding $12 million in accumulated savings.

Social Achievements

• Achieved the best safety performance in AEP’s history in 2012 with zero employee or contractor fatalities.
• Provided approximately $67 million in federal and private energy assistance in 2012.
• Implemented a heat safety program in the Distribution business unit to address increased overexertion events due to record heat.

Governance Achievements

• Integrated sustainability reporting with financial reporting.
• Conducted a materiality assessment to prioritize ESG performance based on stakeholder input.
• Increased the target payout ratio range of AEP’s dividend to 60 percent to 70 percent of consolidated earnings.

Climate Goals & Targets

Environmental Challenges

• Severe weather events causing unprecedented physical damage to the electric grid and millions of dollars in damage.
• Aging infrastructure and the need for significant investments to modernize the grid.
• Stringent and expensive environmental regulations driving plant retirements and retrofits.
• Regulatory uncertainty and the need for timely cost recovery.
• Competition in the electricity market and customer switching.
• Economic downturn affecting customer payment rates and energy demand.
• Cybersecurity threats to critical energy infrastructure.
• Lack of a national energy policy creating uncertainty for long-term planning.

Mitigation Strategies

• Investing approximately $3.6 billion in 2013 and $3.8 billion in 2014 and 2015 primarily in regulated businesses.
• Developing a fleet transformation plan to comply with environmental regulations and diversify the fuel mix.
• Implementing a decentralized business operations model to improve regulatory relationships and cost recovery.
• Using securitization to recover deferred costs and mitigate the impact on customers.
• Developing new technologies and practices to improve grid resilience, efficiency, and construction times.
• Strengthening cybersecurity measures and establishing a Cyber Security Operations Center.
• Actively engaging with stakeholders to address concerns and shape public policy.
• Creating an Economic and Business Development group to support local economies affected by plant retirements.

Supply Chain Management

Supplier Audits: More than 200 manufacturing facilities assessed since 2008

Responsible Procurement

• Sustainability surveys of coal suppliers
• Operational assessments of key suppliers

Climate-Related Risks & Opportunities

Physical Risks

• Severe weather events

Transition Risks

• Environmental regulations
• Market shifts

Opportunities

• Development of energy-efficient products and technologies

Reporting Standards

Frameworks Used: GRI G3.1, Electric Utility Sector Supplement

Third-party Assurance: AEP Audit Services performed a limited review

Sustainable Products & Innovation

• New compact 345-kV line design
• Drop-in Control Module (DICM)
• Skid station
• Station in a box

Awards & Recognition

• Edison Electric Institute Emergency Recovery Award
• Edison Electric Institute Emergency Assistance Award
• AEP named to the Target Rock Advisors 2013 Sustainable Utility Leaders Index

Environmental Metrics

ESG Focus Areas

• Safety
• Environmental Performance
• Financial Performance
• Customer Experience
• Employee Engagement
• Climate Change
• Grid Reliability
• Stakeholder Engagement
• Supply Chain Sustainability
• Diversity & Inclusion

Environmental Achievements

• Reduced CO2 emissions by 21% from 2005 levels (approximately 115 million metric tons in 2013)
• No significant enforcement actions in 2013 despite 188 regulatory inspections
• 48 million gallons of fuel oil transferred without a single spill in River Operations
• Lowest number of incidents in Environmental Performance Index since 2003

Social Achievements

• No employee fatalities for the second consecutive year
• Best recordable incident rate in over a decade
• Successful employee-led gain-sharing program resulting in $1000 bonus for most employees
• Improved pension funding to 99%
• Nearly 25,000 jobs and over $3.5 billion in investment brought to communities through economic development efforts

Governance Achievements

• Completed corporate separation of Ohio generation assets
• Continued consecutive quarterly common stock cash dividends for over a century
• Improved debt-to-capitalization ratio to 54.3% (lowest in over a decade)
• Integrated sustainability reporting with financial reporting for the fifth year

Climate Goals & Targets

Environmental Challenges

• Volatile capacity markets and low capacity prices in PJM Interconnection auctions
• Aging infrastructure across power plants, transmission, distribution, and inland waterways
• New and stringent environmental regulations (e.g., MATS, GHG regulations)
• Lack of a cohesive national energy policy
• Cybersecurity threats
• Physical security threats to grid infrastructure
• Copper theft
• Coal unit retirements and their impact on reliability and jobs
• Misalignment of gas and electric markets
• Decommissioning of coal plants

Mitigation Strategies

• Working with peers and PJM to reform capacity auction process
• Significant capital investments in transmission and distribution infrastructure ($3.8 billion to $4.1 billion annually 2014-2016)
• Active participation in development of new environmental regulations
• Advocating for a national energy policy
• Strengthening cybersecurity programs and information sharing
• Proactive measures to enhance physical security of substations
• Working with state legislatures to address copper theft
• Developing plans for employee transition during coal unit retirements
• Engaging in FERC initiative to better align gas and power markets
• Establishing a plant decommissioning team

Supply Chain Management

Supplier Audits: Annual Sustainability Coal Supplier Survey (four surveys conducted)

Responsible Procurement

• Sustainable procurement practices
• Annual Sustainability Coal Supplier Survey
• CDP Supply Chain Survey

Climate-Related Risks & Opportunities

Physical Risks

• Severe weather events

Transition Risks

• Climate regulations
• Market shifts towards renewable energy

Opportunities

• Development of energy-efficient products and services

Reporting Standards

Frameworks Used: GRI G3.1, GRI Electric Utility Sector Supplement, IIRC, SASB

Third-party Assurance: AEP Audit Services performed a limited review

Sustainable Products & Innovation

• BOLD (Breakthrough Overhead Line Design) for transmission lines

Awards & Recognition

• Fortune magazine's World's Most Admired Companies list
• ENERGY STAR Partner of the Year Award
• Edison Award
• Faraday Award
• Top 100 Call Center awards
• J.D. Power Utility Website Evaluation Study

Environmental Metrics

ESG Focus Areas

• Sustainability
• Environmental
• Social
• Governance
• Climate Change
• Energy Efficiency
• Renewable Energy
• Diversity & Inclusion
• Safety
• Culture
• Risk Management
• Corporate Governance

Environmental Achievements

• 70% reduction from 2000 CO2 emission levels from AEP generating facilities by 2030 (intermediate goal)
• Surpassing an 80% reduction of CO2 emissions from AEP generating facilities from 2000 levels by 2050 (long-term goal)
• Aspirational goal of zero CO2 emissions by 2050

Social Achievements

• Named to Fortune magazine’s World’s Most Admired Companies list in the electric and gas utilities sector
• Included in the 2020 Bloomberg Gender-Equality Index (GEI)
• Recognized in the Corporate Equality Index as a Best Place to Work for LGBTQ Equality
• Recognized by Victoria Media as a Top 100 Military Friendly Employer
• Named to Forbes magazine's America's Best Employers for Diversity 2019 list
• Named a Best Place to Work for Disability Inclusion
• Investing in employees to ensure it remains an employer of choice and to build an inclusive culture

Governance Achievements

• 12 out of 13 director nominees are independent
• Annual shareholder engagement on governance issues, including ESG matters and strategy with Lead Director participation
• Strong Independent Lead Director with clearly delineated duties
• Executive sessions of non-management directors at every Board meeting
• Annual election of all directors
• Robust stock ownership guidelines for executive officers and non-employee directors
• Majority voting in the election of directors with director resignation policy
• Risk oversight by full Board and Committees
• Annual Board and Committee self-evaluations, including individual Board member evaluations
• Board and Committees may hire outside advisors independently of management
• Audit Committee, HR Committee, and Corporate Governance Committee composed entirely of independent directors
• Limit on the number of public company directorships Board members may hold (4)
• Diverse Board in terms of gender, ethnicity and specific skills and qualifications
• Proxy access for shareholders

Climate Goals & Targets

Environmental Challenges

• Rapidly changing utility industry with new technologies and shifting energy policy and environmental regulation
• Managing risk in a rapidly changing utility industry
• Maintaining the safety of AEP employees and the public
• Cybersecurity and physical security threats

Mitigation Strategies

• Investing in core utility operations to support operating earnings growth
• Investing in contracted renewable generation
• Successful regulatory proceedings in several states
• Efforts to reduce expenses
• Designed executive compensation process to manage risks and ensure it does not encourage excessive risk-taking
• Implementing a robust risk oversight process involving the full Board and its committees
• Annual review of cybersecurity and the effectiveness of AEP’s cybersecurity processes

Supply Chain Management

Climate-Related Risks & Opportunities

Awards & Recognition

• Fortune magazine’s World’s Most Admired Companies
• Bloomberg Gender-Equality Index (GEI)
• Corporate Equality Index Best Place to Work for LGBTQ Equality
• Victoria Media Top 100 Military Friendly Employer
• Forbes America's Best Employers for Diversity 2019
• Best Place to Work for Disability Inclusion

Environmental Metrics

ESG Focus Areas

• Climate Change
• Diversity, Equity and Inclusion
• Safety
• Corporate Governance

Environmental Achievements

• Reduced CO2 emissions by 70% from 2000 levels by 2021; set new goals to reduce carbon emissions by 80% by 2030 (from a 2000 baseline) and to achieve net zero carbon emissions by 2050.
• Long-term contracts for 2,750 MWs of wind, 80 MWs of hydro, and 30 MWs of solar power.

Social Achievements

• Launched "Seize the Moment: Let’s Keep the Momentum Going" action plan to accelerate diversity and inclusion; CEO signed CEO Action for Diversity and Inclusion pledge.
• AEP Foundation launched "Delivering On the Dream: Social and Racial Justice" grant program ($5 million over five years).

Governance Achievements

• Board of Directors continually reviews risks posed by new environmental rules; Board’s Committee on Directors and Corporate Governance oversees AEP’s annual Corporate Accountability Report.

Climate Goals & Targets

Environmental Challenges

• Supply chain disruptions due to the COVID-19 pandemic.
• Regulatory uncertainty regarding environmental regulations (Clean Water Act, Clean Air Act, CO2 emissions).
• Potential for regulatory disallowances of costs.
• Risks associated with counterparty performance in energy markets.
• Climate change related physical and financial risks.

Mitigation Strategies

• Implemented risk mitigation strategies to address supply chain disruptions.
• Actively managing compliance with environmental regulations and participating in rulemaking processes.
• Seeking recovery of costs through regulated rates.
• Managing counterparty risk through cash deposits and other measures.
• Investing in grid modernization and renewable energy to mitigate climate change risks.

Supply Chain Management

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather events
• Droughts
• Floods

Transition Risks

• Regulatory changes
• Market shifts towards renewable energy

Opportunities

• Development of energy-efficient products and services
• Investment in renewable energy

Awards & Recognition

• Gallup Exceptional Workplace Award (2021)

Environmental Metrics

ESG Focus Areas

• Climate Change
• Governance
• Social Impact

Environmental Achievements

• 66% reduction in greenhouse gas emissions from 2005 baseline by 2022; on track for 80% reduction by 2030 and net-zero by 2045.

Social Achievements

• Not disclosed

Governance Achievements

• Active engagement in trade associations to influence climate policy; Board of Directors regularly discusses climate change issues and approves ESG strategy.

Climate Goals & Targets

Environmental Challenges

• Balancing trade association memberships with AEP's climate goals; navigating differing views on climate policy within trade associations.

Mitigation Strategies

• Using influence and expertise to moderate positions within trade associations; maintaining active engagement to educate members and share differing views.

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Not disclosed

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Regulatory changes, market shifts

Opportunities

• Investment in renewable generation, energy storage, grid modernization

Reporting Standards

Frameworks Used: TCFD

Certifications: Null

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Not disclosed