Dateline: October 10, 2002

AEP plans to mothball seven power plants

COLUMBUS, OH - American Electric Power began steps last week to move seven Texas power plants to inactive, or mothballed, status as the company continues negotiations with the Electricity Reliability Council of Texas (ERCOT) on the status of eight other power plants.

AEP announced on Sept. 11 that it would mothball the 16 gas-fired power plants if they were not needed by ERCOT for “reliability must run” or “RMR” purposes. An RMR plant is one required to run to ensure reliability of the electricity grid, even if electricity from that plant is not required to meet market needs.

“We are still in negotiations with ERCOT, but it was evident that seven of the plants would not be needed for reliability purposes,” said Eric van der Walde, executive vice president - wholesale for AEP.

Plants in the following cities will be moved to inactive status beginning immediately: Abilene, Point Comfort, Quanah, Corpus Christi, Bronte, and Stamford.  There are two plants in Corpus Christi that will become inactive.

The mothballing process will take up to two months to complete, depending upon the specific plant.

AEP and ERCOT continue negotiations on an interim agreement that will compensate the company for maintaining plants in operating condition and running the plants when needed by ERCOT for RMR purposes. The interim agreement will allow time for completion of a study of ERCOT’s longer-term reliability needs and the negotiation of longer-term RMR agreements, if necessary.

“An interim agreement will protect ERCOT’s reliability interests while addressing AEP’s desire to take immediate action to improve financial performance,” van der Walde said. “Our decision on these 16 plants has the potential to improve AEP’s 2003 financial performance by $30 million to $40 million.”

The decision to deactivate the plants is a result of the introduction of electricity deregulation and competition in Texas. Many new, highly efficient power plants have been built in Texas as a response to deregulation. These new plants have lowered wholesale power prices to a point below the costs of generating electricity from the 16 older AEP plants.

Approximately 150 employees work at the seven plants being mothballed. AEP has offered a severance package to these employees and has a voluntary severance offer to employees who work at other plants owned by Central Power & Light and West Texas Utilities. Eligible employees whose employment is terminated through either the voluntary or involuntary severance program, and who are unable to find employment elsewhere within AEP, will be provided with outplacement assistance, severance compensation, and benefits.

Plants in the following cities are still being discussed in negotiations with ERCOT: Corpus Christi, Abilene, Mission, San Benito, Laredo, Girvin, San Angelo, and Victoria.