Although energy efficiency and demand response are not physical assets, we incorporate them in our integrated resource planning because they serve as important resources in meeting our system’s energy and capacity needs.
Energy efficiency and demand response are tools that help meet state energy reduction goals as well as giving consumers tools to manage their energy use. In addition to partnering with customers to achieve higher levels of efficiency in their homes and businesses, AEP is also reducing energy consumption in our own operations.
Energy efficiency and demand response programs have received regulatory support for cost recovery in most of the states we serve, and this is necessary to enable sustainable demand response and energy efficiency programs going forward. For AEP, appropriate cost recovery includes reimbursement of program costs, consideration of net lost revenues and an opportunity to earn a reasonable return. This regulatory treatment ensures that these programs are appropriately considered along with supply-side investments, such as power plants.
Starting in 2008, AEP ramped up efforts to reduce peak demand and energy consumption through energy efficiency and demand response programs. AEP’s operating companies have since implemented more than 100 programs across our service territory. From 2008 through 2014, our operating companies invested approximately $700 million and achieved reductions in demand by over 1,500 MW and energy consumption by over 5.2 million MWh. These results are preliminary and subject to third party verification as required. In addition, for the 2014/15 PJM delivery year, AEP has approximately 575 MW of demand response capability in the PJM Interconnection.
With increasing efficiency standards, such as the implementation of more efficient lighting and appliance standards, we are concerned that energy efficiency mandates will become more difficult and costly to achieve in the future. Legislators in some of our states are rethinking energy efficiency requirements mandated through a utility’s rates due to the cost and achievability concerns as well, as we have seen in Ohio and Indiana.
Further, certain state mandated requirements may be virtually unachievable from an economic perspective. In other words, the cost to attain participation rates necessary to achieve the targets could be much higher than the overall benefits associated with the corresponding impacts.
We have also taken measures to reduce energy consumption in our office buildings and service centers. We reduced our kilowatt-hour (kWh) usage by 26 percent by the end of 2014, compared with the 2007 baseline. The equivalent accumulated savings from reduced energy consumption at more than 300 facilities exceeds $24 million. We achieved these energy consumption reductions through equipment investments, such as new heating and cooling systems, and an employee education campaign.