SHREVEPORT, La., April 23, 2008— American Electric Power (NYSE:AEP) subsidiary Southwestern Electric Power Company (SWEPCO) today announced the Louisiana Public Service Commission’s (LPSC) approval of a formula rate plan for the company’s 176,000 Louisiana customers. The LPSC unanimously approved the plan in its April 16 regular session. Commission approval follows the announcement of an agreement regarding the plan between SWEPCO and the LPSC staff reached last month.
Under the plan, SWEPCO will implement base rates based on a formula and have its earnings reviewed annually. The initial impact on base rates will be determined after the Commission’s review of SWEPCO’s earnings filed each April. Adjusted rates will be effective with August customer bills. A request to recover finance charges on new generation construction will be addressed in a future filing. Cost recovery of the John W. Turk power plant, the Company’s proposed base load generating unit, also will be addressed through a separate filing.
Separate from base rates, the cost of fuel will continue to be handled as it has historically with no profit to the company. Fuel costs are adjusted regularly throughout the year, subject to regulatory review.
As part of the plan, SWEPCO agreed to a $5 million credit rider effective with August 2008 bills. As a result of the rider, residential customers using 1,000 kWh will see a decrease of approximately $0.37 per month. The three-year agreement also lowers depreciation rates for some company assets.
“We are pleased at the Commission’s ruling to adopt a formula rate structure for SWEPCO, replacing the lengthy and costly process associated with traditional rate cases,” said Venita McCellon-Allen, SWEPCO president and chief operating officer. “While the LPSC will continue its regulation of SWEPCO customers’ rates, the new structure provides an efficient process for timely recovery of investments in infrastructure that maintain and improve reliability for our customers.”
SWEPCO’s rate of return is set at 10.565 percent under the terms of the plan. Previously the company was allowed to earn 11.1 percent. The formula rate plan contains a sharing provision between the company and customers, triggering rate adjustments if the earned return is outside an established “bandwidth” of 10.015% to 11.115%.
SWEPCO serves over 464,000 customers in three states, including 112,000 in western Arkansas, 176,000 in Northwest Louisiana, and 176,000 in East Texas and the North Texas Panhandle. News releases and other information about SWEPCO can be found at http://swepco.com.
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 nearly 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 American Electric Power and its Registrant Subsidiaries contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although the registrants 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 and performance 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 (including the company’s ability to obtain any necessary regulatory approvals and permits) 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 of new investments in generation, distribution and transmission service and environmental compliance); resolution of litigation (including 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; volatility in the financial markets, particularly developments affecting the availability of capital on reasonable terms and developments impairing AEP’s ability to refinance existing debt at attractive rates; 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, coal, nuclear fuel and other energy-related commodities; changes in utility regulation, including the potential for new legislation in Ohio and the allocation of costs within regional transmission organizations; accounting pronouncements periodically issued by accounting standard-setting bodies; the impact of volatility in the capital markets on the value of the investments held by AEP’s pension, other postretirement benefit plans and nuclear decommissioning trust; prices for power that AEP generates and sells 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.