Continuous Improvement

Almost every work process can be improved, and people who do the work every day are the best ones to identify those opportunities. AEP has adopted a continuous improvement framework that relies on a well-known experiential learning cycle known as Plan-Do-Check-Adjust.

We are actively engaging employees to continuously identify process improvements as part of standard business operations.

By giving employees ownership and the freedom to experiment with possible solutions in a structured way, we foster entrepreneurship that, in turn, sparks creativity, innovation and prudent risk-taking.

To achieve the level of success we believe is possible, we are working to enhance the coaching skillsets of AEP leaders to improve problem-solving at all levels of the organization. We are also actively engaging employees to continuously identify process improvements as part of standard business operations. A major focus of this work is increasing customer value. We are building a management system that supports our continuous improvement efforts and enables us to achieve our strategic goal of delivering a superior customer experience.

Today, continuous improvement principles are being embedded into our daily work. Continuous improvement gives us the tools, efficient processes and knowledge to continue to reinvent ourselves and remain relevant and attractive to our customers, investors and employees. AEP’s strong financial, environmental, economic and social growth and performance over the past few years is a testament to its success.

Here are some successes to share:

AEP is using continuous improvement to enhance the customer experience in many different ways. By mapping and evaluating the current step-by-step process a customer experiences from the time they request new service to receipt of their first bill, we can create standard work that makes this experience better for customers. In addition, this process will help leaders better engage with their employees while encouraging them to become problem solvers and ensuring alignment across all departments involved.

AEP’s Transmission Planning group is using continuous improvement to impact customer reliability. Through a collaborative effort among AEP, municipal utilities and electric cooperatives, the group created a new software tool, called The Transmission Customer Database (TCD), that quickly integrates information from several AEP data sources to provide Transmission Planners detailed, customer-specific reliability data nearly in real-time.

The TCD reduces the manual effort required behind identifying potential reliability issues for customers. It also maintains reliability mitigation plans and documented communications with customers, allowing our planners to have better-informed discussions with customers about reliability.

In 2016, our operating companies used continuous improvement tools to improve credit and collections activities across the AEP system. Between 2011 and 2014, net charge-offs from customers who did not pay for their electricity use increased steadily, while service disconnects for non-payment remained relatively flat. In addition, a standard approach to securing high-risk accounts was lacking. A cross-functional team developed and successfully implemented strategies to more quickly address high-risk accounts, increase collections in the field and the back office, and ultimately cut the backlog of service disconnect orders. These efforts assisted in both reducing bad debt expenses by 12.4 percent and the uncollectible amount of previous monthly service billings by nearly $11.4 million when compared to 2015. These positive trends were achieved as the year-end electric revenue was generally unchanged from the previous year.

As a result of continuous improvement practices, AEP Texas crews were able to complete over 33,000 more construction hours in 2016, which is a 16 percent improvement over 2015. The contractor crews completed over 8,000 more construction hours, and due to changes in contractor management, saved AEP over $4 million in costs. The Engineering team was also able to design the 41,000 additional hours without adding staff.

What works well in one location may also work in another. That is why we are making a concerted effort to share ideas and solutions learned from other continuous improvement efforts. A key driver behind our success has been the high level of employee engagement. We are embedding continuous improvement principles in our daily work, aligning improvements with our strategic goals, and establishing a management system to sustain change while we develop leaders as coaches to promote and support a problem-solving culture.