Reliability Valuation in AEP Texas A Study on Cost Vs Returns

Introduction Study performed in 2009 Regression analysis What is a reliability program? Does it move the needle? Reduction vs prevention 2009 – we’ve implemented a lot of changes to the reliability programs since then Regression analysis – compared dollars spent in the past vs reliability improvement on those outage types Does it move the needle? - Do we see real SAIDI or SAIFI benefits? Reduction vs. prevention? - Does it make an outage smaller (sectionalizing) or does it prevent it to begin with (forestry)

Caveats Analysis – Correlation or Causation? Diminishing Returns Some outages mis-labeled Diminishing Returns Some programs very O&M heavy Results specific to AEP Texas The good ol’ disclaimer… Just because numbers went down, we can’t be entirely sure the investment is what drove that Some programs can only go so far before you saturate your system or before you run out of things to do GOOD OL’ DISCLAIMER – Past performance does not guarantee future results

Results Explanation Projection Dollars per customer minutes out Percent capital

Strong Performers D-Line inspection and repair: Lightning mitigation: $1.00/CMI, 24% capital Lightning mitigation: $1.03/CMI, 100% capital Sectionalizing: $1.70/CMI, 99% capital Station animal guards: $4.71/CMI, 80% capital

More Strong Performers Replacing older relays $5.42/CMI, 100% capital Installing station SCADA $5.67/CMI, 95% capital Feeder ties/upgrades $8.50/CMI, 95% capital

Weaker Than Expected Wire replacement: Performance-based forestry $33.98/CMI, 95% capital O&M savings from OT work Performance-based forestry $48.64/CMI, 24% capital Pole replacement: $495.05/CMI, 78% capital Safety Possibly skewed Performance-based means targeting areas that have already had tree problems (non-proactive.)

Other Notable Findings Cycle-based forestry $15.70/CMI, 18% capital Hybrid forestry $27.55/CMI, 18% capital System hardening – not much data in 2009 Distribution Automation – almost no data in 2009 Cycle-based forestry – purely trimming circuits on a cycle. Hybrid – some cycle, some performance-based.

Conclusion No plans to repeat the study at AEP SAIDI and SAIFI not the only drivers Customer satisfaction Overtime O&M reduction Safety Don’t skimp on inspections!