As a general principle, AEP believes that the transition to a competitive market and open choice for customers as to their generation service provider may require reasonable changes in consumer protections, a thorough review of how to accomplish effective consumer education and a steadfast concern for the environment. However, AEP encourages the Task Force to thoroughly evaluate the many suggestions for implementation of programs and charges in light of the following:

(1) does development of a more competitive generation services market when combined with the continued regulation of transmission and distributions services, truly require substantial changes in existing public policies to expand such protections and programs;

(2) if so, how ,and within which arena of our society should any desired programs be implemented so that they are the most efficient and effective in terms of meeting a program's intended objectives;

(3) do adequate regulations, authority and jurisdiction exist ; and,

(4) the cost of any desired and approved program(s) must be recovered by appropriate levels of non-bypassable wires charges on customers bills.

AEP believes that many proposed programs should and can be provided through the normal workings of markets and market forces, and that where possible, this should be the preferred course. We also believe that there are many laws, rules and regulations in place which provide for a substantial level of consumer protection and information, particularly with respect to the environment, and that a thorough examination should be made of existing conditions before enacting new statutes.

Public Benefits Charges

1. Q: As part of implementing electric utility restructuring in Virginia, should the General Assembly establish any rate subsidy and/or energy efficiency assistance programs for low-income households?

R: AEP recognizes fully that adequate consumer protection must be addressed and maintained as competition and service unbundling come to the electric industry. Such changes will require that the many elements comprising consumer protection be reevaluated. However, at this time, AEP believes that it would be unnecessary and inappropriate to implement a rate subsidy (such as a lifeline rate) or energy efficiency program for low-income households through the electricity supply function. There is no reason to believe that delivery of such programs through the electricity supply market would be a more effective method of delivering assistance to low-income households - in contrast to either existing agency programs or services, or those provided in the market place. We further suggest that movement to a more competitive generation services market does not in and of itself support the need for a radical change in public policy which would expand such programs beyond present policy based levels nor depart from existing delivery methods.

AEP supports the wise and efficient use of energy, but believes that such programs should not be mandated to be provided by the utilities. AEP and other utilities, with the SCC's encouragement, have participated in various efficiency and Demand Side Management (DSM ) programs, and most are not cost effective for delivery by the utility under today's economic criteria.

2. Q: How should any such program(s) be structured in terms of eligibility?

R: AEP does not and should not have any information on household incomes. As such, we believe that an electric service deliverer would be ill equipped to determine eligibility or administer such programs.

3. Q: How should any such program(s) be funded?

R: Should any rate subsidy or efficiency programs be required to be supplied by the utility, the cost of such programs should be recovered through a non-bypassable wires charge for all consumers of electric service.

4. Q: How should any such program(s) be administered?

R: AEP believes that there are many energy efficiency services being provided by market forces. Any such rate subsidy or efficiency programs should be administered by and through existing agencies.

5. Q: Are there any programs that could or should serve as an alternative or supplement to any such programs? If so, describe.

R: AEP continues to provide assistance to Virginia households in need of assistance through its involvement with fuel assistance programs and its Neighbor to Neighbor program.

6. Q: Please identify any other issue(s) falling under this topic you believe are important, and provide comments on that issue.

R: None, at this time.

Consumer Education

7. Q: What should be the general purpose of any consumer education program preceding and accompanying Virginia's transition to retail competition?

R: AEP is preparing to file with the SCC, in early November, a proposal for implementing a Customer Choice pilot program for its Virginia service territory. It is clear that effective consumer education will be critical to the success of both the pilot and the eventual transition to full competition. AEP expects that the pilot will provide significant information as to the nature and content of effective consumer education. In general , we believe that an effective education program will require input from various parties with active participation and oversight by the SCC.

AEP contemplates that consumer education will occur in two segments. The first will be generic, non-entity specific education about the overall nature of customers having a choice as to their energy services provider. This education should have the purpose of increasing general awareness of the benefits of competition, the nature of the components of electricity service and how these components may be provided in the future.

The second segment will focus on informing customers about the specific elements of a Company's proposed customer choice pilot, such as how to participate and more detailed information concerning that choice.

8. Q: When should these programs be conducted?

R: The initial generic education programs should be conducted well in advance of the energy service provider option being offered to customers perhaps, three months prior. The company specific education programs should begin several months prior to customers being able to sign up with alternative energy service providers.

9. Q: Who, if anyone, should have regulatory oversight over such programs?

R: See response to 7. Q: and 10. Q:

10. Q: Which state regulatory agencies, if any, should participate in this program, and in what capacity?

R: AEP believes that the SCC should participate actively by leading a collaborative process to facilitate input from all parties in the development of guidelines and principles of an effective education program. The SCC should not dictate every element of such education programs.

11. Q: How should such programs be funded?

R: The full cost of both generic and specific education programs should be recovered from customers in a manner similar to other transition costs. AEP contemplates that the costs associated with the pilots would be deferred and recovered from customers over a definite period of time following the pilot.

12. Q: Should any long-term consumer education program be established, to continue after the transition to retail competition is completed? If so, describe its scope, oversight and funding.

R: Long term education programs may be required. They should be designed based upon information gained as part of the pilots or the programs implemented in other states. They should be funded through non-bypassable wires charges along with other transition costs.

13. Q: Please identify any other issue(s) falling under this topic you believe are important, and provide comments on that issue.

R: None, at this time.

Customer Aggregation

14. Q: Should customer aggregation be permitted in Virginia in conjunction with restructuring?

R: The aggregation of customers will be a necessary component of an effective market for customer choice. Aggregation, when combined with certification of alternative energy service providers, should provide a strong foundation toward consumer protection.

15. Q: Should aggregators be subject to mandatory licensing by any regulatory authority, or be required to furnish evidence of financial soundness?

R: Aggregators should be subject to mandatory licensing and should be required to furnish evidence of financial soundness.

16. Q: Should aggregators be subject to any other requirements? If so, describe them.

R: A complete set of requirements for aggregators may be developed after a thorough review by the SCC.

17. Q: Should localities (counties, cities or towns) be permitted to aggregate their residential load?

R: AEP has significant concern as to whether the competitive business service of customer aggregation is an appropriate function for government. This would apply to inter-locality aggregation as well as aggregation with private entities outside of a government's territory. However, if localities are given the opportunity to become aggregators they should be treated just as any other entity. Aggregation by localities should be permitted only if the government meets the appropriate certification requirements, particularly those related to financial soundness. Local governments should not be given a preference for aggregation over the incumbent energy service provider which has taken and would continue to take risks associated with providing emergency service, default and other similar services through the transition period.

18. Q: Should localities be permitted to aggregate their residential load on an "opt out" basis?

R: Local governmental entities should not be given the right to aggregate their residential customers on an "opt out" basis. Should this occur, governments would be given a substantial advantage for competing in a competitive endeavor without the associated and related risks of insuring reliability and adequacy of service.

19. Q: Should localities be permitted to form inter-locality aggregates?

R: See the response to question 18.

20. Q: Should localities be permitted to aggregate load with private entities outside their territorial jurisdiction?

R: See the response to question 18.

21. Q: Should localities be permitted to aggregate load with private entities or localities outside of Virginia?

R: See the response to question 18.

22. Q: Please identify any other issue(s) falling under this topic you believe are important, and provide comments on that issue.

R: None, at this time.

CONSUMER PROTECTION

Before responding to specific questions on the issue of Consumer Protection, AEP wishes to offer a few general comments.

AEP believes that, as with consumer education and other related issues such as marketing practices and bill content for example, the SCC will have to be given authority and flexibility to provide adequate and appropriate oversight in such areas. In addition, we believe that development of all of the specifics of consumer protection could be facilitated by evolution through a collaborative process involving all stakeholders. AEP further believes that the forthcoming pilot programs will provided additional and useful information in the areas related to consumer protection.

23. Q: Should electric service providers and aggregators be required to disclose standard information in their marketing materials, and in their proposals and contracts for service? If so, what basic information should be provided?

R: At this time AEP suggests that there may be a relatively minimal amount of information which should be standardized and required by those who choose to market, aggregate or provided generation services. The requirements of any such standardization or mandated content - once met - should not be so restrictive as to interfere with an aggregator's or supplier's rights to market within this competitive activity as they see fit or to design a contract in a manner which the contracting parties deem appropriate. AEP believes that some standardization may be appropriate with respect to accuracy and clarity of impact on a consumers bill; information about the entity offering the choice; and the basic requirements a customer must meet in order to enter into a contract or the arrangement being offered by the marketer, aggregator or generation supplier.

24. Q: Should any kinds of marketing practices by electric service providers or aggregators be specifically prohibited? If so, what practices should be barred?

R: At this time, AEP can only suggest generally that false and misleading advertising practices be prevented; for example, AEP does not condone the practice of "slamming".

25. Q: Should Virginia restructuring legislation establish limits on the size of utility service deposits that may be required by electric service providers and aggregators? If so, what limits should be established?

R: AEP believes that the SCC currently has authority to determine appropriate deposits and treatment of those deposits in a bundled and fully regulated environment. We believe that they will continue to have such authority during the transition period with respect to the capped or frozen standard offer rate, and with respect to the provision of distribution services after full choice arrives. We would expect that any deposits related to the provision of generation services would be evaluated by customers as a requirement of any offer made by aggregators or generation suppliers. We believe that there is little indication that statutory standards will be required and if they should be, we believe it is premature to do so at this time.

26. Q: What kinds of standard information should electric bills contain after restructuring? If so, what information should each bill be required to provide?

R: The amount and content of information to be included on consumers bills should be guided by the information which is included there today supplemented, of course, by any new information which will permit the customer to understand the services provided, the components of his total bill and the entity supplying the various components.
27. Q: Should Virginians be given any statutory rights to cancel utility service contracts with electric service providers or aggregators within a specified numbers of days following acceptance? If so, what special rights of recission or cancellation should be provided in statute?

R: AEP believes that it may be reasonable to give consumers a statutory right to cancel a contract with an energy service provider or aggregator within a certain time frame after development of the contract. At this time, AEP does not offer suggestions as to the statutory content of such cancellation or recission rights.

28. Q: Should Virginians be given any statutory protection against unauthorized switching of electric service providers, or "slamming?" If so, what anti-slamming protection should be adopted?

R: As indicated earlier, AEP does not condone the practice of "slamming". We believe that this practice can be effectively monitored and enforced by the SCC through a system of registration and certification, and that the actual experience of any entity with respect to the practice of "slamming" should be one of the factors to be considered in the certification process. At this time, we do not believe that statutory protection should be implemented.

29. Q: Should Virginians be given any statutory protection against any electric service provider or aggregator telemarketing practices? If so, what?

R: The company's response to question 28 would also apply to the telemarketing practices of any energy service provider.

30. Q: Should consumers be furnished assistance by any state regulatory agencies in resolving complaints against electric service providers or aggregators? If so, which agencies should be involved, and what should their responsibilities include?

R: AEP believes that the SCC will need to have sufficient resources and authority to provide assistance to facilitate resolution of complaints. The SCC will continue to have complaint resolution authority involving distribution services, and in some instances , transmission services. The SCC can provide assistance to customers in terms of contacting their appropriate generation supplier or aggregator which can facilitate these parties efforts to resolve disputes.

31. Q: Please identify any other issue(s) falling under this topic you believe are important, and provide comments on that issue.

R: None, at this time.

Environmental Protection:

32. Q: Should Virginia restructuring legislation in any way promote or encourage the use of renewable energy in the generation of electricity? If so, how?

R: AEP opposes Virginia restructuring legislation which would specifically promote or encourage the use of renewable energy. In a competitive market, consumers should be able to purchase power from renewable sources if they choose. They should not be mandated to do so in most cases at a cost premium over expected market prices. If customers desire renewable energy and are willing to pay the price differential between renewable service and non-renewable power, then suppliers will respond and satisfy the demand.
33. Q: Should Virginia restructuring legislation in any way address air quality, directly or indirectly? If so, in what way?

R: AEP opposes coupling of environmental requirements to Virginia restructuring legislation. This is not reason to believe that air quality should change following the advent of Competition, the Clean Air Act Amendments are working and the US EPA and VDEQ already have ample legal authority to regulate air quality issues. State legislatures should not remove from environmental agencies the burden of justifying new controls on the basis of sound science

34. Q: Should Virginia restructuring legislation require electric service providers or aggregators to disclose generation fuels? If so, how should this requirement be implemented and administered?

R: AEP opposes restructuring legislation to require electric service providers or aggregators to disclose generation fuels or "labeling." This information is already reported to agencies, available to the public and would be duplicative. Market forces should be allowed to determine what information customers' desire in making decisions. AEP supports voluntary certification or branding by power suppliers in accordance with government standards for fair and accurate advertising.

35. Q: Please identify any other issue(s) falling under this topic you believe are important, and provide comments on that issue.

R: None, at this time.

Energy Efficiency

36. Q: Should Virginia restructuring legislation in any way promote or encourage energy conservation or energy efficiency, e.g., encouraging installation of energy efficient equipment or energy efficiency monitoring equipment? If so, what incentives should the legislation include?
R: It is AEP's position that restructuring legislation should not specifically promote or encourage energy conservation or energy efficiency. Utilities should not be mandated to subsidize and administer conservation and energy efficiency programs that artificially inflate utility rates to non-participating customers. With competition it is incumbent on utilities to minimize costs to keep rates as low as possible. If there is a market demand for these services, any supplier should be able to compete to serve this demand.

37. Q: Should Virginia restructuring legislation establish a public benefits charge for the purpose of encouraging research and development in the areas of energy conservation and efficiency? If so, how should it be assessed and administered?
R: AEP neither opposes nor supports restructuring legislation to establish a public benefits or "wires charge" for the purpose of encouraging technical research and development for more efficient, less carbon intensive electric generation. AEP feels if a state pursues this course, there will need to be an objective process for allocating research funding that is as immune from political pressures as possible so the most promising technologies are developed and deployed.

38. Q: Please identify any other issue(s) falling under this topic you believe are important, and provide comments in that issue.

R: None, at this time.
Electric Utility Worker Protection

(39. Q: Should Virginia's electric utility workers be given any statutory protections in conjunction
( with the transition to a retail competition? If so, what protections should be provided, and
( through what mechanism?
(
(
(40. Q: If any statutory protections for utility workers result in additional costs or expense, how
( should they be funded?
(
(
(41. Q: Should providers of electric energy in a restructured market be required to maintain
( minimum staffing levels for purposes of reliability? If so, who should determine these
( levels, and what standards should be applied in doing so?
(
(
(42. Q: Should the purchaser of any generation unit or station sold after restructuring, be
( required to (i) hire or continue the employment of such unit or station's employees, and
( (ii) furnish such employees the same wages, working conditions and benefits and terms
( and conditions of employment that were in effect prior to the sale?
(
(
(43. Q: Should new entrants into Virginia's electricity market following restructuring be required to
( comply with any requirements concerning the qualifications of their electrical workers with
( regard to quality, safety and reliability of service? If so, who would establish such
( requirements?
(
(
(44. Q: Should Virginia, in conjunction with restructuring, establish mandatory training and skill
( standards for all electrical workers responsible for systems and equipment that affect
( system reliability and safety?
(
(
(45. Q: Please identify any other issue(s) falling under this topic you believe are important, and provide comments on that issue.

R: AEP wishes to respond to questions 39 - 45 in terms of a general statement.

AEP does not believe that it would be appropriate to single out any individual resource, such as utility workers, and to provided statutory protection to this resource segment as this industry moves into a competitive supply of generation services. AEP believes that its labor resources are one of its most important assets and will seek to utilize, develop and protect that resource as it also seeks to respond to the changes coming to the industry. Balancing the effectiveness of the approach that a utility takes to labor (or any other resource) against the changes in the industry and concomitant changes in utilization of resources is a role appropriately left to management.

Reliability and quality of service will be as important in the future as it is today. As a result, the entities supplying generation, transmission and distribution services will be fully cognizant of the need to retain, attract and enhance a qualified and responsible labor force. To do otherwise would be foolish and self-defeating. In addition, the SCC will continue to have regulatory authority over distribution services, including the establishment of any performance standards it deems appropriate. With respect to Transmission, the Federal Energy Regulatory Commission ( FERC ) will insure that the practices of transmission providers meet certain standards for performance. Generation will be provided within the framework of a competitive market and will exert appropriate market forces ( perhaps, the best regulator ) to insure that an individual supplier is both reliable and efficient.

AEP believes that establishing arbitrary standards related to the utilization of or protection of any particular resources runs counter to the movement toward competition and will merely keep costs above what they otherwise would be . Should the legislature deem it appropriate to implement various programs, which will assist workers during the transition period, such costs should be recovered as a component of the non-bypassable wires charge.