COLUMBUS, Ohio, Aug. 11, 2008 – American Electric Power (NYSE: AEP) has formed a joint venture company with Duke Energy (NYSE: DUK) to build and own new electric transmission assets.
Through the 50-50 partnership, AEP and Duke are proposing to build 240 miles of extra-high voltage 765-kilovolt (kV) transmission lines and related facilities in Indiana. The project would link Greentown Station (near Kokomo, Ind.) with Rockport Station (east of Evansville, Ind.).
Estimated costs for the project are approximately $1 billion, but final costs will depend on the routing of the line, equipment and commodity costs. AEP and Duke will be working with the PJM Interconnection (PJM) and Midwest ISO (MISO) to determine the optimal configuration for the final project. The project will be wholly owned by the joint venture. AEP’s share of the costs will be 50 percent of the total.
The project is part of AEP’s vision of expanded extra-high voltage transmission to improve the reliability of the nation’s transmission grid, allow more efficient use of existing electricity production and delivery infrastructure, protect national security and expand opportunities for new generation, including renewables.
“The ability of electric utilities to continue providing reliable, reasonably priced electricity to fuel our nation’s economic growth is increasingly challenged by aging, insufficient infrastructure; continued growth in electrical load; rising construction costs and a desire to reduce greenhouse gas emissions. These issues can be managed more successfully through strategic expansion of our nation’s transmission grid, including significant investment in extra-high voltage transmission,” said Michael G. Morris, AEP chairman, president and chief executive officer.
“Indiana is home to nearly 27,000 megawatts of generation, and the state’s transmission system delivers electricity across the Midwest and beyond. To continue reliable delivery of this energy and add the output of new generation that has been proposed in the state, Indiana needs additional extra-high voltage transmission capacity. A reliable supply of electricity is fundamental to our quality of life and economic growth, and Indiana’s transmission system, which was largely completed more than 25 years ago, needs to grow as well to continue to meet the needs we have today and in the future,” Morris said.
AEP and Duke will submit the Greentown-Rockport proposal to PJM and MISO for consideration in their transmission expansion plans. The joint venture will file in Indiana to operate as a transmission utility and will file seeking rate approval for the project from the Federal Energy Regulatory Commission (FERC) in third-quarter 2008. The in-service date for Greentown-Rockport will be determined by the MISO and PJM planning processes, with the earliest possible completion in 2014 or 2015.
“Like most parts of the country, Indiana will see significant benefits from extra-high voltage transmission expansion. The need to build additional transmission provides the opportunity to invest in a long-term transmission solution that will facilitate development of additional generation, including renewables, and support the reliable transport of electricity to fuel future economic growth. For example, more than 3,000 megawatts of wind power has been proposed in central Indiana, but additional transmission is necessary to bring it online,” said Susan Tomasky, president, AEP Transmission.
“Building more extra-high voltage 765-kV transmission lines in Indiana can provide significant economic and environmental benefits. A 765-kV transmission line requires less land to carry more power than lower voltage lines, and the 765-kV line would cost less than half as much to build. A 765-kV transmission line also operates more efficiently than lower-voltage lines, reducing the amount of electricity that needs to be generated by reducing line loss – electricity lost during transport. The new 765-kV designs that would be used for this project have line losses of less than one percent, compared with losses as high as 10 percent for a lower-voltage alternative,” Tomasky said.
The joint venture will operate as a transmission utility and be subject to the rules and regulations of FERC, the State of Indiana, PJM and MISO. Equity ownership of the new company will be equally split between AEP and Duke.
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 (including the costs of projects that are canceled) 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 implementation of the recently passed utility law 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.