Original Source: FD (FAIR DISCLOSURE) WIRE
UNIDENTIFIED PARTICIPANT: If I could get everyone's attention for a minute. I am sorry to bother your lunches. It is with great pleasure I am announcing our next speaker and Company, AEP and CEO, Mike Morris.
AEP is a very complex company, and there has been several times when some of its outlook has unnerved us and a lot of investors. Not too long ago, they had just an amazing rate case schedule ahead of them. And since then, Mike and his team have been putting on a virtual clinic of how to craft win-win rate cases.
But as the Head of AEP, his work is never done. And I think going forward, there is still quite a bit to do. And I think they've got a lot to do with the transmission build-out, clean coal and a lot of other key pieces of this industry going forward.
And with that, I would like to introduce Mike Morris. Thank you.
MIKE MORRIS, CEO, AMERICAN ELECTRIC POWER: I appreciate that introduction. One of the things that we always try to do, particularly when we are working with the analytical community is to try to simplify American Electric Power and try to explain to you all how easy it is to understand. I know that is a daunting task, but it is what we're up to each and every day. And we do our best to do that for you. So I appreciate the introduction.
We have had a series of very constructive rate decisions over the last couple of years. And I would argue that much of that had to do with a re-creation, if you will, of the operating companies at American Electric Power. I am a firm believer that the closer the regulator can get to the decision-makers of the operating companies, the better the rate understanding, the better opportunity you have for success in that rate environment.
Today, I am going to do something a little different. I am going to give you what I think is a very exciting bifurcated story. The first part of it will be the more commonplace business profile of where we are, where we hope to go, what we hope to accomplish, what we see as the earnings logic and strength of our Company.
And then for a while, I'm going to spend some time talking to you about what we think are some extremely important national/international Company policy decisions that revolve around the whole notion of where not only is this country going but where is the world going with the challenge that we all know as global warming.
So with that, let me step forward and presume I can hit the right button here to get these slides to move. And then again, maybe I can't. There we go. Now we are moving. Or is somebody moving those for me?
I would take the time to read this to you, but you have all read it. So let's presume that that is part of what we're doing. Can we get the next slide? There we go.
So what we're trying to do with this introductory slide is take you through our plan of sharing with you the analytical community and our investors the profile of when we will be able to dialogue again on any of these issues. And as you can see, we are kind of excited to go to Shreveport, Louisiana for our annual meeting. Many people do their annual meetings in a location where they hope a lot of customers and shareholders won't show up; that is not our plan. We serve the greater Shreveport area. And quite honestly, we're very proud with the growth that we see there. It is substantial. And having the obligation to serve that part of northern Louisiana makes us very happy.
Foster Campbell, who is the Louisiana Commissioner responsible for our Company the way that the Louisiana Commission handles its regulated companies, is quite pleased that we are coming there. We, of course, will have a couple of days after the annual meeting our first-quarter earnings call. And then in June, we will join the Citicorp group to go over some activities with them as well and you at that place. So if I can have the next slide.
I think you're all very familiar with the AEP footprint. For those of you who aren't, we serve 5.1 million customers in 11 states -- area that stretches in the North from Michigan and the South to the great state of Texas and happy to do that along the way.
We are the second-largest power generator in the country behind Southern Company and of course the largest owner/operator of transmission, particularly at the 765 level and above. And I will talk a bit about that distribution the [same].
You can see on the lower right-hand corner of this slide the difference in the generation mix. And that is part, particularly the 67% part of coal that I will speak to in a policy sense as we go forward.
But we look at the proposition here as a great place to make a solid investment in the regulated utility environment with a relatively low-risk profile so long as those regulatory relations continue to be strong. That again is done by the operating company presidents on a day-to-day basis. It's done by really all of the 20,492 people who work at American Electric Power.
Because no matter where you are in our Company, you have some impact on the customer perception of who we are and what we do. That customer perception translates into political perception and regulatory perception, and it makes a huge difference. I have argued over a number of years, at least successfully to myself if not to all of you, that the return on equity calculation has much to do with the view that the regulator has of your company.
So if there is a stream of rates of return on equity that might stretch from 10% to 11%, even if you had Dr. Greenspan as your financial rate of return witness, if they like you, you get near 11%. If they didn't like you, you get near the 9%. If they didn't like you at all, you might get 8% or some change. So I think it is very important to build that relationship, and it's something that all of us at the Company work on all of the time.
When you look at the strategic direction then of where we're going, it really is this proposition of delivering value to U.S. investors and making sure that we are keeping an eye on cost-effective service to our customers, one of the most important things we can do -- many places to go forward and do that. We think it is important to invest in the utility business inside of the regulated envelope that we are so …