COLUMBUS, Ohio, June 18, 2007 – A proposed Integrated Gasification Combined Cycle (IGCC) clean-coal power plant in New Haven, W.Va., could be completed in mid-2012 at the earliest at a cost of approximately $2.23 billion if appropriate regulatory approvals are obtained in West Virginia and Virginia without delays, according to testimony filed with the Public Service Commission of West Virginia (PSC) today by Appalachian Power, an operating subsidiary of American Electric Power (NYSE: AEP).
The filing with the West Virginia PSC supports the company’s application for a Certificate of Public Convenience and Necessity, which was submitted in January 2006, to construct the 629-megawatt IGCC plant in West Virginia, and includes engineering and cost information from the recently completed engineering and design study for the project. The filing also includes a request for the PSC to approve a cost recovery mechanism for the timely recognition in rates of the financing costs incurred during construction, and for full recognition of the plant’s costs in rates after it is placed in commercial operation. Appalachian Power proposes that future rate adjustments related to the plant be considered in conjunction with the company’s annual Expanded Net Energy Cost (ENEC) filings.
In the coming weeks, Appalachian Power plans to file an application seeking appropriate regulatory approvals related to the plant from the Virginia State Corporation Commission.
IGCC technology converts coal into a gas and moves it through pollutant-removal equipment before the gas is burned in gas turbines that drive electric generators. The heat produced by the gas turbines is recovered in boilers that produce steam to drive a steam turbine also coupled to an electric generator. The integrated process results in fewer emissions of nitrogen oxide, sulfur dioxide, particulates and mercury, in addition to lower carbon dioxide emissions.
“With restrictions on carbon dioxide emissions expected in the future, IGCC technology represents an important advancement for power generation and for the coal industry,” said Michael G. Morris, AEP’s chairman, president and chief executive officer. “It’s much less expensive to capture carbon dioxide pre-combustion in the gasification process than it is to capture it post-combustion from a pulverized coal plant.
“When we were the first to announce our intent to build a large, commercial IGCC plant, we anticipated the cost for IGCC would be 20 to 30 percent higher than for a new plant using pulverized coal technology,” Morris said. “That range turned out to be accurate, but even with the cost premium we expect IGCC will be the least-expensive option over the life of the plant.”
The site of the proposed West Virginia plant is adjacent to AEP’s Mountaineer plant. AEP has also proposed building an IGCC plant on a site in Meigs County, Ohio. The Public Utilities Commission of Ohio granted approval to move forward with the Ohio project under provider of last resort provisions. A challenge to the commission’s authority to approve the project is currently going through the normal appellate process. The company is awaiting resolution of that challenge before continuing with the Ohio regulatory process.
“Appalachian Power has a clear need for additional generating capacity,” said Dana Waldo, president and chief operating officer of Appalachian Power. “We have not added baseload generating capacity since the Mountaineer Plant was completed in 1980. But we also recognize the importance our customers place on containing costs. That’s why our West Virginia filing outlines a plan to phase in, over approximately five years, the impact of rate increases that will be necessary to recover the plant’s costs.”
To recover anticipated costs of the IGCC plant, Appalachian Power estimates that it will need to increase West Virginia rates by approximately 12 percent by 2012 when the plant goes into service.
Appalachian Power provides electricity to 1 million customers in Virginia, West Virginia and Tennessee.
American Electric Power is one of the largest electric utilities in the United States, delivering electricity to more than 5 million customers in 11 states. AEP ranks among the nation’s largest generators of electricity, owning more than 38,000 megawatts of generating capacity in the U.S. AEP also owns the nation’s largest electricity transmission system, a nearly 39,000-mile network that includes more 765 kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined. AEP’s transmission system directly or indirectly serves about 10 percent of the electricity demand in the Eastern Interconnection, the interconnected transmission system that covers 38 eastern and central U.S. states and eastern Canada, and approximately 11 percent of the electricity demand in ERCOT, the transmission system that covers much of Texas. AEP’s utility units operate as AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana and east Texas). AEP’s headquarters are in Columbus, Ohio.
This report made by AEP and its Registrant Subsidiaries contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of its Registrant Subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: electric load and customer growth; weather conditions, including storms; available sources and costs of, and transportation for, fuels and the creditworthiness of fuel suppliers and transporters; availability of generating capacity and the performance of AEP’s generating plants; AEP’s ability to recover regulatory assets and stranded costs in connection with deregulation; AEP’s ability to recover increases in fuel and other energy costs through regulated or competitive electric rates; AEP’s ability to build or acquire generating capacity when needed at acceptable prices and terms and to recover those costs through applicable rate cases or competitive rates; new legislation, litigation and government regulation including requirements for reduced emissions of sulfur, nitrogen, mercury, carbon, soot or particulate matter and other substances; timing and resolution of pending and future rate cases, negotiations and other regulatory decisions (including rate or other recovery for new investments, transmission service and environmental compliance); resolution of litigation (including pending Clean Air Act enforcement actions and disputes arising from the bankruptcy of Enron Corp. and related matters); AEP’s ability to constrain operation and maintenance costs; the economic climate and growth in AEP’s service territory and changes in market demand and demographic patterns; inflationary and interest rate trends; AEP’s ability to develop and execute a strategy based on a view regarding prices of electricity, natural gas and other energy-related commodities; changes in the creditworthiness of the counterparties with whom AEP has contractual arrangements, including participants in the energy trading market; actions of rating agencies, including changes in the ratings of debt; volatility and changes in markets for electricity, natural gas and other energy-related commodities; changes in utility regulation, including the potential for new legislation or regulation in Ohio and membership in and integration into regional transmission organizations; accounting pronouncements periodically issued by accounting standard-setting bodies; the performance of AEP’s pension and other postretirement benefit plans; prices for power that AEP generates and sell at wholesale; changes in technology, particularly with respect to new, developing or alternative sources of generation; other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes and other catastrophic events.