On average, a typical coal-fired plant operated by AEP generates $US160 million in regional economic activity, $US63 million in labour income, and supports more than 700 regional jobs annually.2 As the company transitions away from coal to renewable energy generation, it is working to alleviate the impact on the communities that were built around the plants that have powered its network for generations.
AEP aims to decommission several coal-fired plants by 20303 to achieve its net zero carbon ambition. Working toward a just transition for the people and communities affected by the move to a low-carbon world is both a moral imperative and good business. It’s important to shareholders as an indicator of long-term profitability, ensuring that the transition to net zero is an inclusive process that generates new jobs and reduces inequality. By co-designing climate solutions with affected stakeholders, companies can play a positive role in the net zero transition – while seizing its economic opportunities.
MAM’s portfolio management team has engaged with the company’s senior management to understand and evaluate its approach to the planned shutdowns of coal-powered plants, including support for the employees and communities affected.
In November 2022, MAM met with AEP’s Chief Sustainability Officer to discuss the Pirkey plant in East Texas, where decommissioning was completed in the first half of 2023. The plant’s operations generated $US2.3 million in tax revenue each year to the local district, so its retirement could negatively impact two communities that have grown up around the plant over more than a century of operation, with knock-on effects for employment, educational resources and local businesses.
The discussion covered the objectives and plans put in place to support the Pirkey community around the plant through and after the decommissioning.
At part of AEP’s approach, the Pirkey Transition Taskforce was set up when planning for the decommissioning began in 2021. It includes representatives of AEP’s local subsidiary Southwestern Electricity Power Company, local and regional leaders, civic organisations, schools and businesses. The taskforce has partnered with the Just Transition Fund – an American philanthropic initiative helping coal communities build local capacity and advance low-carbon industry to create and retain wealth locally. Together, they completed a high-level action plan and continue to collaborate.
Alongside ongoing community collaboration through the Pirkey Taskforce, affected employees were considered for internal employment opportunities, and supported with internal job fairs and training opportunities.
In AEP’s approach to the decommissioning of its remaining coal plants, the company is applying lessons learned from previous experience: leveraging local and state government relationships, creating workforce transition teams to support, employ and reskill its employees, and building local capacity to create new local industry.”
Senior Vice President
Global Listed Infrastructure Team
Macquarie Asset Management