1

AEP Workforce Planning and Process

August 26, 2008

CEWD Midwest Region Meeting

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The AEP Workforce Today

Age

26.7%

37.7%

21.0%

14.6%

Less than 34 34-4445-54 55 and over

The AEP workforce is aging

• The average age of an AEP worker is 47

• 24% of AEP workers are currently eligible for retirement

AEP enjoys a stable workforce

• The average AEP employee has 17.7 years of service

Years of Service

26%

17.4%

13.1%

22%21.3%

Less than 5 5-910-19 20-2930 plus

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Workforce Planning: Why?

Business Drivers

Higher-than-normal turnover due to aging workforce Attrition will outpace employees ready to step into next level of job family A decade of cost-cutting has reduced overall skilled complement and on-the-job

training opportunities Historical approach to training may require four – five years for new hires to attain

required skill level

Aging workforce is a national issue Demographically, there are fewer workers available to replace aging baby boomers

Projected retirements require greater advance planning

Need to anticipate and address changing skill sets

Continued opportunity to increase diversity of workforce

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Workforce Planning Process

• Needed data is determined & gathered

• Data is analyzed and factors are identified that might impact the workforce

• Determination of the workforce needed to achieve AEP’s Business Goals and Strategies

Analysis

• Strategies are selected to address the specific workforce challenges of that business unit.

• A plan to achieve the future workforce is defined based on the strategies selected.

• A Talent Management Review meeting is held with the leadership of the Business Unit to review and approve the plan moving forward.

AnalysisPlan

Creation /Revision

ExecutionAnalysisPlan

Creation /Revision

Execution

• The Strategies selected and approved are implemented.

• Individuals are assigned and carry out various actions to achieve the plan.

• Business leadership reviews and monitors progress of plan execution.

Plan Creation / Revision

Execution

Analysis

Analysis

Plan

Creation

/Revision

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Defining the Need

Applied predictive modeling to 2008 workforce to quantify expected retirements

Employee age plus years of service is a strong predictor of potential retirements

AEP history shows that employees with age and years of service totaling 90 or more will retire within five years

Over a historic 5 year period, 8.3% of the workforce retires Positions that have more than 8.3% of the workforce with ages and

years of service totaling 90 or more will experience greater than normal retirement rates

Other Turnover Terminations for reasons other than retirements average 8.8% every 5

years

Turnover for a normal 5 year period is about 17%

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Defining the Need, continued

Generally, AEP positions will experience turnover of 18.9% over next five years

Projected turnover 2008– 2012 only 1.8% greater than historical average

However, some locations and job families will experience turnover significantly greater than 20%

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FROM 2008-2012, AEP IS PROJECTED TO LOSE 18.9% OF ITS EMPLOYEE POPULATION TO RETIREMENT AND OTHER TURNOVER

0 1000 2000 3000 4000 5000 6000 7000 8000

Operative [1342/162]

Craft [6828/1240]

Administrative [1865/313]

Technician [1483/287]

Professional [5223/989]

Leader [3116/828] 26.6%

18.9%

19.4%

16.8%

18.2%

12.1%

• Versus a 17.1% historical norm for 5-year turnover

EE's in position

Turnover

[ ] Current Compliment/Turnover No.

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THERE HAS BEEN SIGNIFICANT PROGRESS WITH REPLACING CRAFT TURNOVER

90

372

32

212

76

381457

-160

-58

-200

-100

0

100

200

300

400

500

Projected Employee Turnover

Employees in Feeders

Replacement Outlook for Next 5 Years

Distribution Workers Transmission Workers Plant Workers

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FRONT LINE LEADER TURNOVER IS ESPECIALLY CONCERNING

0 500 1000 1500 2000 2500

Shared Svcs [168/45]

Generation [896/202]

Utilities [828/272]

All AEP [1907/523] 27.4%

32.9%

22.5%

26.7%

EE's in position

Turnover

[ ] Current Complement/Turnover No.

2008 Projected 5-year turnover among Supervisors

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Workforce Planning Strategies

Leadership TalentPlanning

Military Sourcing

Recruiting Teams

Recruiting Friendly Policies

Education Assistance

Telecommuting

Vacation

Leveraging Technology

Review of Products & Services

Contractor Usage

Cross-training

Best Practices

Knowledge Retention Program

Legacy of Knowledge

Mentoring Program

Hiring Co-ops and Interns

Training Alliances

Mentoring Programs

ReplacementPlanning

Targeted Development

Communities of Practice

Attract Retain Talent