AEP CEO praises WV employees’ cost-saving ideas - WBOY - Clarksburg, Morgantown: News, Sports, Weather

AEP CEO praises WV employees’ cost-saving ideas

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  • Many WV coal counties losing revenue

    Many WV coal counties losing revenue

    Monday, August 8 2016 10:15 AM EDT2016-08-08 14:15:05 GMT

    As Appalachian coal production continues its drastic decline, West Virginia’s coal-producing counties are  not only losing people as lifelong residents are forced to flee their homes in order to find work, but in many cases, they’re also relinquishing millions of dollars from their budgets.

    As Appalachian coal production continues its drastic decline, West Virginia’s coal-producing counties are  not only losing people as lifelong residents are forced to flee their homes in order to find work, but in many cases, they’re also relinquishing millions of dollars from their budgets.


For The State Journal

The chief executive officer of American Electric Power praised the suggestions of several company employees in West Virginia for helping reduce costs last week as he described the company’s financial performance to investment analysts.

Nick Akins noted that employees of the John Amos power plant came up with an idea that is saving the company millions of dollars, while an employee in Charleston figured out that it was cheaper to wash safety vests than to buy new ones.

His comments came as Akins and other executives discussed the company’s second quarter earnings and its plans for the future. Akins also commented on proposed EPA rules pertaining to carbon dioxide emissions from existing coal-burning power plants. He said the proposed rules are unworkable because they make unreasonable assumptions about power plant operations.

Akins’ mention of AEP’s West Virginia employees came as he listed efforts to reduce operating costs throughout the company by changing things both big and small.

“Our LEAN activities are progressing very well,” he said. “We’re not letting up on the progress here because this part of our cultural transformation redefining how we do business in the future.

“Just to give you an idea of the range of the things that our employees are coming up with, at the Amos Plant, they reviewed the plant’s barge unloading system that led to a $6 million investment to be made, but it reduces coal costs by $10 million per year — very, very positive.”

Akins went on to mention a smaller change that equated to big success.

“And then a smaller change, but I think no less important, is in (the) APCo Charleston area, an employee noticed that we were discarding flagging vests,” he said. “And we decided to wash them instead and save $6,000 per year. And I know that sounds small, but that’s one employee coming up with a $6,000 per year idea.

“So, if those kinds of things that will have to work indigenously within our organization at levels throughout the organization to ensure that we continue to get the benefits of the LEAN activities and the efficiency changes that we’re making.”

Jeri Matheny, spokeswoman for AEP subsidiary Appalachian Power in Charleston, said the LEAN program was an intensive look at all corporate operation to encourage people at all levels of the company to suggest money-saving ideas.

At Amos, the people who unload coal from river barges noticed that the equipment and process they used was slow. Because barge unloading was so slow, some coal had to be delivered to Amos by rail. Rail delivery costs AEP about $5 per ton more than barge delivery, Matheny said. So, by offloading barges more quickly, more coal can be delivered by water, reducing transportation costs, she said.

Matheny described the suggestion to wash vests instead of discarding them as “a simple solution, obviously, but it was one of those things that hadn’t been brought to anyone’s attention.”

On July 25, AEP reported earnings of $390 million in the quarter that ended June 30, up from $338 million in the same quarter last year. Year-to-date earnings totaled $950 million, up from $701.

Appalachian Power had operating income of $36.2 million in the quarter, an increase of $4.2 million year-over-year. Wheeling Power, AEP’s other operating subsidiary in West Virginia, saw an earnings decrease, from $10.4 million last year to $9.9 million this year.

In discussing rules limiting carbon dioxide emissions, Akins said the EPA’s goals are unrealistic given the engineering realities of operating power plants.

“As (EPA) Administrator (Gina) McCarthy has mentioned on several occasions, and I want to reiterate here, is that this far-reaching plan is a proposed rule and is yet to be finalized. So, as we look at the proposed rule, the current plan is much too aggressive in many states and in fact is a multi-variable equation that doesn’t solve within the timeframe given,” he said.

“To force a change in resource mix, system dispatch and market conditions, along with navigating a myriad of state-related review processes covering many issues while not impacting reliability in such a short timeframe could result basically in a convoluted mess that turns the foundation, assumption and building blocks of the plan into pipedreams.”

Among other things, the EPA expects power plants to increase their efficiency by 6 percent when only about 1 percent gain is a viable goal, he said.

“Moreover to expect energy efficiency overall to improve 1.5 percent per year, when EPRI itself, the Electric Power Research Institute, has determined it only 0.5 percent to 0.6 percent can be achieved annually, certainly goes beyond aspirational thinking,” Akins said. “As the CEO, I’m all about aspirational visions but it must be grounded in reality.

“AEP is committed to working with the EPA just as we did during the mercury rule comment period, which is far from over, by the way, given 2015 pending retirements of coal-fired generation have yet to occur. AEP was right about the analysis of the mercury rules, and we will continue to be factual and collaborative during the upcoming comment process.

“As an aside, speaking of the units retiring in 2015, 80 percent of them were called upon and ran during the second quarter, a quarter that was essentially no extreme weather conditions.”

Among the AEP power plants scheduled to retire next spring are Philip Sporn in Mason County and Kanawha River in Kanawha County.

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