Construction will continue under option to sell power in other markets
SHREVEPORT, La., June 24, 2010 – Southwestern Electric Power Company (SWEPCO), a unit of American Electric Power (NYSE: AEP), said today that construction of the John W. Turk, Jr. Power Plant will continue under an option to sell in other markets the power originally planned to serve the company’s Arkansas retail customers.
The action came after the Arkansas Supreme Court confirmed its May 13, 2010, ruling that overturned the Arkansas Public Service Commission’s (APSC) 2007 approval of the plant. Under the court’s ruling, SWEPCO no longer has a Certificate of Environmental Compatibility and Public Need (CECPN) for the Turk Plant to serve the company’s Arkansas retail customers.
Arkansas law provides two options for the construction of new generating facilities. One is for a regulated utility to serve its retail customers and seek cost recovery through APSC-approved rates. The second option is selling power in other markets, which does not require a CECPN. Both types of plants have been built in Arkansas.
SWEPCO does not intend to file a new application for a CECPN because of the substantial delay and cost that would result. SWEPCO will file notice with the APSC regarding the change in status of the plant. The change applies only to the Arkansas portion of the Turk Plant capacity and does not require APSC approval.
"This decision means we will not be able to use electricity supplied by the Turk plant to serve SWEPCO´s retail customers in Arkansas, as was originally planned in this important project," said Michael G. Morris, AEP chairman, president and chief executive officer. "But the Turk Plant will also serve SWEPCO’s retail customers in Louisiana and Texas, where the plant has received regulatory approval. We will continue construction in order to fulfill our obligations in Louisiana and Texas in the most cost-effective manner. We will secure other markets for the 88 megawatts of Turk Plant capacity that would have served our Arkansas retail customers.”
Venita McCellon-Allen, SWEPCO president and chief operating officer, said, “Arkansas customers have been served for decades by SWEPCO plants in Louisiana and Texas. Planning the Turk Plant to serve SWEPCO’s retail customers in three states follows that same historic practice. To meet the future energy needs of our Arkansas customers, we must now look to other resources for a supply of base load power that is reliable and available at the most reasonable cost possible.”
SWEPCO owns 440 megawatts, or 73 percent, of the $1.7 billion plant’s 600-megawatt capacity. SWEPCO’s share of the plant cost is an estimated $1.3 billion.
Approximately 88 megawatts, or 20 percent of SWEPCO’s capacity in the plant, was designated for SWEPCO’s retail customers in Arkansas. Under the change in status for the Arkansas portion of the plant’s output, other options include wholesale or out-of-state retail markets.
Today’s Arkansas Supreme Court decision denied separate petitions by SWEPCO and the APSC for a rehearing of the court’s May 13 ruling that reversed the APSC’s decision to approve the Turk Plant in 2007. The court also denied SWEPCO’s motion to delay the effective date of the May 13 decision pending a request to the U.S. Supreme Court to review the case.
“While we are certainly disappointed in the decision, we respect the opinion of court,” McCellon-Allen said. “Without the CECPN, we are turning to another option available to SWEPCO under Arkansas law.”
The APSC granted SWEPCO’s application for a CECPN Nov. 21, 2007, and issued an amended CECPN Dec. 31, 2007. In a June 24, 2009, ruling, the Arkansas Court of Appeals overturned the APSC’s decision. On May 13, 2010, the Arkansas Supreme Court upheld the Court of Appeals, reversed the CECPN and remanded the case to the APSC.
The Louisiana Public Service Commission and Public Utility Commission of Texas approved construction of the plant in 2008. SWEPCO began construction of the plant after receiving an air permit from the Arkansas Department of Environmental Quality in November 2008. SWEPCO has continued construction during the appeal process.
As of May 31, 2010, approximately $1.01 billion had been spent on the Turk project, including $786 million by SWEPCO for its 73 percent share of the plant. As of May 31, SWEPCO and the joint owners had an additional $436 million in contractual commitments for the plant.
Construction of the plant itself is about 28 percent complete. The overall project, including engineering and related activities, is about 37 percent complete.
SWEPCO’s balanced approach to new generation includes coal and natural gas plants. The 600-megawatt (MW) coal-fueled Turk Plant in southwest Arkansas is a base load facility designed to meet customers’ need for power that is consistently available 24/7. The projected completion date for the Turk Plant is October 2012. The 508-MW combined-cycle, natural gas-fueled Stall Unit is an intermediate facility designed to provide power that is quickly available as customers’ needs increase and decrease. The Stall Unit began commercial operations June 16 in Shreveport, La. The 300-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,” McCellon-Allen said.
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,” McCellon-Allen 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.