11/25/2009

Arkansas Commission Approves SWEPCO Rate Increase

SHREVEPORT, La., Nov. 25, 2009 – The Arkansas Public Service Commission (APSC) yesterday approved a base rate increase for Southwestern Electric Power Company (SWEPCO), a unit of American Electric Power (NYSE: AEP).

The base rate change will result in an increase of approximately $3.84 per month, or 5.15 percent, in the overall bill for a residential customer using 1,000 kilowatt-hours, effective with December 2009 bills.

The APSC also approved the recovery of costs of the J. Lamar Stall Unit, a 508-megawatt, natural gas-fueled power plant under construction in Shreveport, La. When the $386 million plant is completed in the summer of 2010, an increase of approximately $3.17, or 4.26 percent, will go into effect.  At that time, the combined impact of the base rate increase and “generation recovery rider” for the Stall Unit will be approximately $7.01 per month, or 9.41 percent.

The increase is SWEPCO’s first Arkansas non-fuel base rate increase in 24 years.

"During these challenging economic times, all the parties worked to achieve a reasonable compromise which we believe will serve the company and our customers well,” said Paul Chodak, SWEPCO president and chief operating officer. “We will continue to work with the Commission, the Attorney General and all stakeholders to serve our customers’ evolving needs and allow SWEPCO to continue to provide reliable, reasonably price electric service in Arkansas.”

With its action, the APSC approved the terms of a settlement agreement filed Sept.17 by SWEPCO, the Commission staff and the Consumer Utilities Rate Advocacy Division of the Arkansas Attorney General’s office.

The settlement includes the cost-of-service increase of $17.8 million in base rates and $11 million annually for the generation recovery rider.

SWEPCO’s original request, filed Feb. 19, 2009, totaled $53.9 million, including $25.3 million for cost-of-service and $28.6 million for recovery of financing costs during construction of the Stall Unit and the 600-megawatt coal-fueled Turk Plant now under construction in Hempstead County, Ark. (440 MW owned by SWEPCO).  The estimated impact of SWEPCO’s original request, filed Feb. 19, 2009, was $15.43 per month, or 17.7 percent, for a residential customer using 1,000 kWh.

SWEPCO withdrew its request related to the Turk Plant because regulatory issues regarding the plant are still pending. The Arkansas Supreme Court granted separate requests by SWEPCO and the APSC to review the Turk Plant case after an appeals court overturned the certificate issued by the APSC for construction of the Turk Plant to serve Arkansas customers. The appeals court rejected the APSC process used to approve the project – a process used for the past 30 years for numerous other major projects in the state. If the certificate for the Turk Plant is confirmed by the Arkansas Supreme Court, SWEPCO will return to the APSC with a request for recovery of financing costs during construction of the plant.

SWEPCO’s new base rates include a mechanism designed to encourage energy efficiency and conservation during summer on-peak months of May through September. The first 1,500 kWh used by customers during this period will cost less than usage above 1,500 kWh.

For May through September billing cycles, the basic residential service rate will be $0.0442 each for the first 1,500 kWh and $0.0534 each for all additional kWh. The winter rates for October through April billing cycles will be flat at $0.0358 per kWh for all use.

Base rates refer to the costs of building, maintaining and operating SWEPCO’s electric system, including power plants, transmission and distribution lines and facilities to serve customers. Base rates do not include the fuel portion of the customer’s bill, which covers the costs of fuel and purchased power and is a direct pass-through with no profit. Increases in electric bills over the past 24 years have been due to fuel costs for power generation and increases in electricity usage.

“Since 1985, SWEPCO has absorbed or offset the higher costs of serving customers through belt-tightening and greater efficiency,” Chodak said. “But our new electric rates will continue to provide good value for the money. Even with this proposed increase, our rates will be close to the present state average and still well below the national average,” Chodak said.

A Nov. 2 evidentiary hearing in Little Rock followed public comment hearings Oct. 13 in Fayetteville and Oct. 15 in Hope. The Sierra Club, National Audubon Society, Audubon Arkansas, Wal-Mart Stores LLC and Sam’s West, Inc. – intervenors in the case – do not oppose the settlement agreement.

SWEPCO serves 113,500 customers in Arkansas, along with 180,000 in Northwest Louisiana and 180,000 in East and North Texas for a total of more than 473,500. 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.

MEDIA CONTACTS:

SWEPCO Corporate Communications:
Peter Main, 479-409-7857
Scott McCloud, 318-673-3532
Kacee Kirschvink, 318-780-7615

AEP Media Relations and Policy Communications:
Melissa McHenry, 614-716-1120

ANALYSTS CONTACT:
Julie Sherwood
Director, Investor Relations
614-716-2663

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