Bloomberg News

AEP Reduces Coal-Fired Plants It Will Shut Because of EPA Rules

February 13, 2012

Feb. 10 (Bloomberg) -- American Electric Power Co., the largest U.S. coal consumer, reduced by 13 percent the amount of coal-fired generation it will shut because of new environmental regulations, saying it may get state support to spend $940 million to keep a Kentucky unit operating.

The company still plans to close power plants with about 5,138 megawatts of capacity, Chief Executive Officer Nick Akins said at an investor conference in New York today. The Columbus, Ohio-based company said in June that new U.S. Environmental Protection Agency rules would force it to retire as much as 5,909 megawatts of capacity.

The difference stems from the company’s decision in December to seek a 31 percent rate increase to fund environmental equipment needed to keep its Big Sandy Unit 2 in Kentucky operating, Akins said later in an interview. State regulators have indicated American Electric may be able to recover from customers the almost $1 billion needed to keep the unit operating, he said.

A U.S. air-pollution rule to reduce power-plant emissions that cross state lines was halted by a federal court last year. Separate regulations to cut mercury pollution are scheduled to go into effect in 2015. Akins has asked for more time to phase in the regulations and in Nov. 30 testimony to federal energy regulators said the company would have to spend $6.7 billion in the next three years to comply with the rules.

American Electric plans to shut power plants that generate about 2,600 megawatts and sell electricity at state-regulated rates, plus another 2,538 megawatts owned by a unit that sells power at wholesale-market rates, Akins said.

FirstEnergy Retirements

It said it hasn’t identified which of the regulated plants will shut. Slides from a Dec. 7 presentation list 12 units with expected retirement in 2014 that are owned by its utility subsidiaries.

For the competitive unit, the company lists 5 plants it owns in Ohio, according to slides posted today. One of the plants closed last year. It also included in its tally 53 megawatts from a Duke Energy Corp.-owned unit in Ohio, which American Electric owns a 12.5 percent stake in, according to the other company’s website.

FirstEnergy Corp., an Akron-Ohio based utility owner, has announced it will shut 3,349 megawatts of coal-fired power plants this year because of new environmental rules.

Arch Coal Inc., the fourth-largest U.S. coal producer by market value, said today it expects demand for the fuel will decline by 50 million tons or more this year as mild weather and low natural-gas prices curb use by power companies.

--With assistance from Julie Johnsson in Chicago and Mark Drajem in Washington. Editors: Jessica Resnick-Ault, Tina Davis

To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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