Jan 10 - McClatchy-Tribune Regional News - Dan Gearino The Columbus Dispatch, Ohio


The era of cheap electricity might be drawing to a close.

Few companies will be affected as dramatically as Columbus-based American Electric Power, whose reliance on inexpensive coal has led to decades of low prices and high levels of carbon-dioxide emissions.

That's just one of many complex issues before Michael G. Morris, AEP's chairman, president and CEO.

On his agenda are global concerns, such as the environmental toll of coal-fired power plants, along with local ones, such as his company's opposition to a proposed casino in the Arena District.

 Morris, who has led the utility since 2003, also has to deal with the question of his successor. He plans to retire in November 2011, when he turns 65, and he is grooming several in-house candidates to potentially take his place.

By then, the country might have a new system for regulating carbon dioxide, a byproduct of coal-burning power plants such as those run by AEP, and AEP's fortunes will depend on its ability to navigate the new landscape.

"This is a technological challenge that is not inexpensive," Morris said in an interview in his top-floor office. "It has the potential to substantially raise the cost of electricity."

Some environmentalists would say this kind of talk is a scare tactic. But Morris doesn't mean it to be. One of his priorities has been to improve the tenor of his discussion with AEP's one-time adversaries, including policymakers and advocacy groups.

Those talks have been fruitful, as the company has signed on as a supporter of a cap-and-trade bill that the U.S. House passed in the summer.

"Mike has been very successful at getting more engaged with the groups and with the issues," said Mark Brownstein, deputy director for the energy program at the Environmental Defense Fund in New York.

Before Morris arrived, AEP was "almost impossible to talk to," Brownstein said.

But deep disagreements remain between environmental advocates and utilities. Most of the differences are over the timetable for carbon-dioxide reduction and the methods for allocating the costs, Brownstein said.

This dialogue with former opponents is part of a larger makeover for AEP, which is putting a greater emphasis on energy efficiency and renewable energy, and is trying to improve the technology for controlling pollutants from burning coal.

Coal has been an asset and a liability for AEP. The low price of the fuel is one reason why Ohio's residential electricity prices are the lowest among the 10 most-populous states, and AEP's prices are the lowest among Ohio's investor-owned utilities.

The House bill would require companies to buy credits for the right to release carbon dioxide. President Barack Obama has said this could be done for about the cost of a postage stamp per day for customers.

"If society decides that this is something that we as Americans need to do, then so be it," Morris said.

But he has a big caveat. He thinks the "postage-stamp" estimate of the cost is way off. A more accurate forecast would be several thousand dollars per year, he said.

As a government-regulated utility, AEP would be allowed to pass on its pollution-control costs directly to customers, subject to approval by the Public Utilities Commission of Ohio and regulators in other states.

Consumer advocates are ready to fight any significant cost increases.

"Given our economic situation, I don't know that we want to surrender low prices," said Dave Rinebolt, executive director of Ohio Partners for Affordable Energy, a Findlay-based advocacy group for low-income customers.

Rinebolt noted that AEP prices are rising even before any legislation has become law. The company's new rate plan, which regulators approved last year, calls for three years of increases: up to 7 percent last year, and 6 percent for both this year and 2011 for central Ohio customers.

"I think that complying with carbon restrictions can be a low-cost venture, and I'm not willing to concede that it need (cause) significant increases in customer bills," Rinebolt said.

If there is a significant price increase, customers presumably will look for ways to reduce electricity use. And that hits utilities in the bottom line because their main source of profit isn't in the power, but in transporting it and maintaining the power system.

The great hope for utilities, then, will be on the roads: plug-in electric cars, such as the upcoming Chevrolet Volt. If the cars can reach a mass audience, power plants would partly replace gasoline as a fuel source. Power demand would skyrocket.

And that leads to another one of AEP's big projects. Last month, Steven Chu, the U.S. secretary of energy, came to central Ohio to announce a $75 million grant to help AEP install advanced electricity meters in 110,000 local homes. Future versions of the technology would let customers monitor their power costs in real time, giving them the knowledge to better reduce costs.

The meters would communicate with the power grid, meaning that AEP could better manage its supply and be more prepared for the demands of electric vehicles.

Although some of AEP's concerns are global in nature, others are in the company's backyard: the Arena District, blocks from its Downtown headquarters.

Investors want to build a casino in the district, and they promoted an amendment to the state constitution to allow the project, which voters approved. A casino, with its blinking lights and 24-hour operations, would be a boon to AEP's bottom line.

Despite this, Morris joins many of the city's political leaders in opposing the plan. "A 24/7 casino operation just doesn't fit," he said.

He said so when he met recently with representatives of the project. "I said, 'We'd be happy to work with you in finding another location, but we would join in the endeavor to make it crystal clear to you that the Arena District just isn't the place,' " he said.

Even before the casino issue, AEP and Morris have been increasingly visible in state and local issues. The company is playing a lead role in developing the Scioto Mile park near its headquarters, and Morris is chairman of the Ohio Business Council, a lobbying group that represents the state's largest companies.

Morris has a lot of work left to complete, and he needs to do as much as he can before November 2011. He said jokingly that he will step down at 11:11 a.m. on 11/11/11.

He resists talk about staying longer in his current role. The only way he would remain involved, he said, is as chairman -- if the board of directors chooses to keep him in that role.

"It's pretty hard to unplug," he said. "But you don't want to do the Lee Iacocca thing, kind of hanging on (and saying), 'Oh, my God, what do I do with the rest of my life?' That's not my desire."

The new president and CEO probably will be someone already at AEP.

One executive, Holly Koeppel, stepped down after she learned that she was not in the running for the top job, an AEP spokesman said. She has since been hired as co-director of a division of Citigroup.

According to Morris, the transition probably will occur this way: The company will name a president in the latter half of next year, leaving Morris as chairman and CEO. That person will be poised to become CEO when Morris retires.

Morris, then, would have the luxury of leaving on his own terms. "I'd love to have that happen," he said.

dgearino@dispatch.com

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