SHREVEPORT, La., Feb. 8, 2012 – American Electric Power (NYSE: AEP) subsidiary Southwestern Electric Power Co. (SWEPCO) has asked the Arkansas Public Service Commission (APSC) to review the company’s plans to install environmental controls on the Flint Creek Power Plant in Gentry, Ark.

SWEPCO and Arkansas Electric Cooperative Corp. (AECC) each own 50 percent of the 528-megawatt coal-fueled plant. SWEPCO operates the facility. As a baseload unit, Flint Creek provides power 24 hours a day. It is the only baseload power plant in Northwest Arkansas.  

“To comply with new Environmental Protection Agency regulations, we must install additional environmental controls to continue operation of the Flint Creek Power Plant beyond 2015, or we must replace that generating capacity to serve Northwest Arkansas,” said Venita McCellon-Allen, SWEPCO president and chief operating officer.

“Our obligation under Arkansas law is to provide reliable service at the lowest reasonable cost to our customers. Our extensive analysis shows that retrofitting the coal-fired Flint Creek plant is the most economical and reliable choice compared to new natural gas combined cycle units or converting the existing Flint Creek unit to natural gas. Because this involves such a significant investment, we are asking the Arkansas Public Service Commission to review the plan and determine that it is in the public interest,” McCellon-Allen said.

SWEPCO filed its request at the APSC today.

“Flint Creek anchors the Northwest Arkansas grid with a reliable supply of power 24 hours a day, and it has done so for more than 30 years,” McCellon-Allen said. “With the retrofit option, new technology will be added to a valuable existing asset to maintain critical reliability and meet stringent new environmental regulations with the least possible cost impact to our customers.”

SWEPCO and an independent consulting firm evaluated the coal plant retrofit and natural gas alternatives using a range of coal and natural gas prices, emissions allowances and the impact of carbon dioxide regulation. The analyses included compliance with immediate and longer term environmental regulations. “We recognize that today’s historically low natural gas prices may lead to the perception that a natural gas option has to be more economic. We carefully evaluated those options. But over the long term, even with the potential cost impacts of additional future regulations factored in, the coal retrofit option was still the economic choice,” McCellon-Allen said.           

To comply with multiple EPA regulations, SWEPCO would install controls for sulfur dioxide (SO2), nitrogen oxide (NOx), mercury and other hazardous air pollutants. The controls include a dry flue gas desulfurization system (DFGD), commonly known as a scrubber, to reduces SO2 emissions; low NOx burners (LNB) and overfire air (OFA) to reduce NOx emissions; activated carbon injection (ACI) to reduce mercury emissions; and a fabric filter, commonly known as a baghouse, to filter particulate matter. Current plans are to have the equipment in place and operating by June 2016. (SWEPCO would have a one-year extension beyond 2015 to continue operations if it is in the process of installing controls.)

The estimated cost of the project is $408 million. SWEPCO’s 50 percent share is $204 million.

The estimated cost impact for SWEPCO’s Arkansas customers would be an increase of approximately $2.97 per month, or 3.85 percent for a residential customer using 1,000 kWh per month, beginning in 2017. For commercial customers, the increase would be approximately 3.87 percent.

“The filing at the APSC is not required for this type of project, but SWEPCO believes it is important for the Commission to see a full analysis and have the opportunity to reach its own conclusion as to whether it is in the public interest for SWEPCO to proceed with the retrofit,” McCellon-Allen said. A Certificate of Environmental Compatibility and Public Need (CECPN) or Certificate of Convenience and Necessity (CCN) are not required for the project. SWEPCO would obtain the appropriate environmental permits.

Because of the time constraints for compliance with the retrofit or replacement of the capacity, SWEPCO is asking the APSC to establish a procedural schedule that would permit an order to be issued by the end of 2012. Pending the APSC’s decision and approval of environmental permits, construction would begin in January 2014 with completion by June 2016.

Flint Creek Power Plant was placed in service in 1978.

SWEPCO serves 520,400 retail customers in three states, including 113,700 in western Arkansas, 225,700 in northwest and central Louisiana and 181,000 in north and eastern Texas.

Flint Creek co-owner AECC provides wholesale electricity to Arkansas’ 17 electric distribution cooperatives. The cooperatives serve more than 500,000 members in Arkansas and surrounding states.

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 AEP and 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; the ability to recover regulatory assets and stranded costs in connection with deregulation; the ability to recover increases in fuel and other energy costs through regulated or competitive electric rates; the ability to build or acquire generating capacity when needed at acceptable prices and terms and to recover those costs through applicable rate cases; new legislation, litigation and government regulation, including requirements for reduced emissions of sulfur, nitrogen, mercury, carbon 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.); AEP’s ability to constrain its operation and maintenance costs; AEP’s ability to sell assets at acceptable prices and on other acceptable terms, including rights to share in earnings derived from the assets subsequent to their sale; the economic climate and growth in its service territory and changes in market demand and demographic patterns; inflationary trends; its 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 and number of participants in the energy trading market; changes in the financial markets, particularly those affecting the availability of capital and AEP’s ability to refinance existing debt at attractive rates; 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 membership and integration into regional transmission structures; 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; and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes and other catastrophic events.