SHREVEPORT, La., Feb. 19 /PRNewswire-FirstCall/ -- Southwestern Electric
Power Company (SWEPCO), a unit of American Electric Power (NYSE: AEP), today
submitted to the Arkansas Public Service Commission (APSC) a request to
increase the company's Arkansas non-fuel base rates by $53.9 million. If
approved, the increase in base rates would be SWEPCO's first in Arkansas in
more than 23 years.
SWEPCO's request includes a $25.3 million increase in the direct cost of
providing service to the company's retail customers, including investments in
infrastructure and ongoing operating costs. It also includes approximately
$28.6 million to recover financing costs related to SWEPCO's ongoing power
plant construction program.
If approved, the request would result in an overall increase of $15.43 per
month, or 17.7 percent, for a residential customer using 1,000 kilowatt-hours
per month. New rates likely would go into effect in late 2009 or early 2010.
"We have made sizeable investments in our high-voltage transmission and
local distribution systems, and we continue to face substantially higher costs
of providing reliable electric service to our retail customers," said Paul
Chodak, SWEPCO president and chief operating officer. "For example, the
average cost for wire, poles and labor has increased by 37 percent over the
past 10 years. We also completed the Harry D. Mattison Power Plant in
Northwest Arkansas and made other investments in our electric system as part
of ongoing efforts to meet our customers' growing electric needs," Chodak
said.
"For many years, we have been able to absorb or offset these kinds of non-
fuel cost increases, but we have reached a point where a rate increase is
necessary for us to be able to continue providing the kind of reliable,
affordable power our customers expect, while also earning an adequate rate of
return for our investors," Chodak said. "An adequate rate of return is needed
to maintain a strong credit rating, avoid increased costs of borrowing, and
continue making the necessary investments in our electric system."
SWEPCO also is seeking recovery of financing costs during construction of
two major power plants - the 600-megawatt John W. Turk Jr. Power Plant in
southwest Arkansas and the 500-megawatt J. Lamar Stall Unit in northwest
Louisiana. "Recovery of financing costs while the plants are under
construction, instead of at the end of construction, will help prevent
compounding interest on these major investments, which will save customers
money in the long run," Chodak said.
As a base load unit, the Turk Plant will use advanced coal combustion
technology and is designed to run 24 hours a day and serve demand that exists
all the time in the electric system. As an intermediate facility, the natural
gas-fueled Stall Unit is a high-efficiency combined-cycle plant designed to
meet system requirements between base load and peak load.
"Since 1985, when our last major construction program was completed,
SWEPCO has absorbed or offset the higher costs of serving customers through
belt-tightening and significant changes in the way we do business," Chodak
said. "But as we have been saying, we are out of belt notches to tighten, and
we need to raise our rates to cover our increased costs so that we can
continue to provide our customers with affordable, reliable electricity in the
years ahead."
SWEPCO's current rates are 13 percent below the Arkansas average and 31
percent below the national average. "We know there is no good time to raise
rates, and we're aware of the impact the economy is having on individuals,
families and businesses. But our 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.
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 pass-through with no
profit to the company. "Increases in electric bills over the past 23 years
have been due to fuel costs for power generation and increases in electricity
usage. In fact, fuel price increases would have been higher if not for
SWEPCO's strategic fuel mix. Most of our baseload generation comes from lower-
cost coal and lignite, which offsets some of the impact of volatile natural
gas prices," Chodak said.
In December, SWEPCO provided the required notice to the APSC that the
company planned to file a rate case in 60 to 90 days. "Turk plant opponents
immediately sought to make our case all about paying for the Turk plant, but
customers and other stakeholders should not be misled," Chodak said. "This
request is about the big picture, including all the electric infrastructure
investments and day-to-day operating costs needed to keep the lights on, now
and in the future."
In addition, the rate case process began well before the Jan. 27 ice
storm. Service restoration costs from the ice storm are not included in the
rate request. Methods of major storm cost recovery for utilities are under
consideration in a separate docket opened by the APSC last year.
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.
