Plant Construction Continues
SHREVEPORT, La., June 29, 2009 – Southwestern Electric Power Company (SWEPCO), a unit of American Electric Power (NYSE: AEP), has asked the Arkansas Supreme Court to review a case concerning the John W. Turk Jr. Power Plant because of what SWEPCO considers to be errors in an appeals court ruling. In a June 24 decision, the Arkansas Court of Appeals overturned the Arkansas Public Service Commission’s (APSC) decision to grant a Certificate of Environmental Compatibility and Public Need (CECPN) for construction of the Turk Plant.
For the near term, SWEPCO is continuing construction of the $1.6 billion plant in Hempstead County, Ark. “By law, the CECPN issued by the APSC remains in effect during the appeal process,” said Paul Chodak, SWEPCO president and chief operating officer.
“The APSC approval was overturned because the court objected to the approval procedure and not because the judges objected to the Turk Plant. We believe the Turk Plant holds the best future for long-term reliability and affordable power for our customers,” Chodak said.
“Since the court’s decision was announced, we have heard clear support from many stakeholders – including community leaders, business and economic development groups, and elected officials – who want to see the plant completed,” Chodak said. “They realize its importance to individual customers and to the health of the state’s economy.”
If SWEPCO is forced to stop construction at the Turk Plant, it will cost valuable time and money. “Approximately $713 million has already been spent on plant construction, and a total of $1.3 billion has been committed. It would cost even more to stop construction and then restart it.” Chodak said. “These costs have been prudently incurred under an order of the Arkansas Public Service Commission. The longer it takes for construction, the longer it takes for customers to get an additional power resource and the more it will cost customers in the long run. It will also affect the expected jobs and the needed revenues that will go into Arkansas’ tax base.”
A CECPN is legal authorization granted by the state of Arkansas to a regulated utility to construct a power plant or transmission facilities and is only issued after public and formal review by the state and interested stakeholders.
The Turk Plant has received approval in all three states served by SWEPCO. The plant also has received the required air permit. “Our efforts over the past several years have followed the standard regulatory process of each state. SWEPCO prudently followed the Arkansas rules in an established regulatory process. But the court’s decision rejected that process, which has been used and relied upon for decades,” Chodak said. “Everything we have done in planning for additional generation capacity is rooted in our dedication to providing affordable and reliable electric service for our customers. Meeting our customers’ current and future electricity needs is not only our mission; it is also our obligation,” Chodak said.
SWEPCO also has an obligation to its partners. One partner in the Turk Plant is the Arkansas Electric Cooperative Corporation, which provides electricity to about 490,000 customers in Arkansas. The electric cooperatives own 12 percent of the Turk Plant. Therefore, it is not just SWEPCO’s Arkansas customers that are damaged by further delay, but also these additional Arkansas customers.
The court’s decision also potentially affects the plant’s construction work force, which currently stands at 723 people, about 400 of whom live in Hempstead County and nearby counties. Well over 1,000 people will be at work when construction activities peak.
The APSC granted SWEPCO’s application for a CECPN on Nov. 21, 2007 and issued an amended CECPN on Dec. 31, 2007. SWEPCO began construction of the plant in Hempstead County, Ark., after the company received an air permit from the Arkansas Department of Environmental Quality in November 2008. The air permit is under appeal before the Arkansas Pollution Control and Ecology Commission. The Louisiana Public Service Commission and Public Utility Commission of Texas approved construction of the plant in March 2008 and July 2008, respectively.
The timetable for the appeal process is uncertain. If the Arkansas Supreme Court grants SWEPCO’s request for review, the court may elect to accept briefs or oral arguments, but there is no specific time frame for a decision. The Supreme Court will be in recess from mid-July until after Labor Day.
SWEPCO´s new generation projects include the 600-megawatt (MW) coal-fueled Turk Plant in southwest Arkansas, designed to meet the company’s base load needs, with a projected completion date of 2012. The 508-MW combined-cycle, natural gas-fueled Stall Unit is designed to serve intermediate load – between base load and peak load – and is under construction in Shreveport, La. It is scheduled for completion in 2010. The 340-MW simple-cycle, natural gas-fueled Mattison Plant in Tontitown, Ark., was completed in 2007 and is now helping to meet peak demand on the SWEPCO system.
“Together, these three plants will allow SWEPCO to continue the fuel diversity that has resulted in some of the lowest electricity prices in the region for many years,” Chodak said. For example, SWEPCO’s average residential rate is 13.8 percent lower than the Arkansas state average and 31.3 percent lower than the national average.
The Turk Plant´s "ultra-supercritical" advanced coal combustion technology will use less coal and produce fewer emissions, including carbon dioxide, than traditional pulverized coal plants. The plant will use low-sulfur coal and will include state-of-the-art emission control technologies, including a design that allows for the retrofit of carbon dioxide controls. “It will be one of the cleanest, most efficient coal-fueled plants in the United States,” Chodak said.
SWEPCO serves more than 473,500 customers in three states, including 113,500 in western Arkansas, 180,000 in Northwest Louisiana, and 180,000 in East and North Texas. SWEPCO’s headquarters are in Shreveport, La. News releases and other information about SWEPCO can be found at www.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 and north Texas). AEP’s headquarters are in Columbus, Ohio. News releases and other information about AEP can be found at www.aep.com.
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 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 AEP’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; 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 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 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.