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SWEPCO Mulling New Gas-, Coal-Fired Generation for Ark-La-Tex

Shreveport, LA-based Southwestern Electric Power Co. (SWEPCO), a unit of American Electric Power, announced plans for short-term, mid-term and long-term generation expansion in its Arkansas-Louisiana-Texas service territory. The utility is focusing on gas-fired generation to meet near-term needs and is looking to coal to fill more distant baseload generation requirements.

"This is an important step toward addressing the growing electricity needs in this region," said AEP CEO Michael G. Morris. "This plan, if approved by the regulatory commissions in the states, means AEP will move forward with approximately $1.4 billion of our planned investments in new generation resources to help us continue to economically meet the electricity needs of this part of the country. It also includes a diverse mix of generation types, including efficient coal-fueled generation, to help reduce long-term over-reliance on a single fuel for electricity generation."

AEP has included approximately $1.4 billion for new SWEPCO generation in its previously disclosed capital projections.

To meet SWEPCO's more immediate power requirements for 2007 to 2009, the company will build up to 480 MW of simple-cycle natural gas-fired combustion turbine peaking generation in Tontitown, near Fayetteville, AR, and will sign firm power purchase contracts with third-party suppliers for up to 450 MW. No external bids for long-term peaking power were submitted. Power suppliers will be named when contracts are finalized.

To meet demand growth through 2010 and beyond, SWEPCO proposes to build a 480 MW combined-cycle gas-fired plant at its existing Arsenal Hill Power Plant in Shreveport.

"Rapid growth throughout SWEPCO's service territory, especially in northwest Arkansas, and the need to increase generating capacity in a relatively short amount of time to meet that demand, means we need to build additional peaking and combined-cycle natural gas plants," said SWEPCO COO Nick Akins. "While these facilities will use natural gas, it's important to note that natural gas will continue to be only 15% of our fuel mix."

SWEPCO proposes to build a new baseload coal- or lignite-fueled plant by 2011 to meet longer-term needs. Two sites are being considered for the plant: the company's Henry W. Pirkey Power Plant in Hallsville, TX, and a site near Fulton in Hempstead County, AR, near Texarkana, TX. The site selection is to be announced later this summer and will ultimately require approval of the Arkansas, Louisiana and Texas public utility commissions.

Combustion technology for the plant also has not been finalized; however, SWEPCO is considering integrated gasification combined cycle (IGCC) and ultra-super critical pulverized coal.

"We are strong supporters of IGCC clean-coal technology for new power generation as demonstrated by our parent company's plans to build IGCC plants in two of its eastern states; however, the coal used in our region requires different IGCC technology than the GE technology that will be used for AEP's eastern IGCC plants," Akins said. "Ultra-super critical coal generation is a new pulverized coal technology for this region that will have lower emissions than any existing coal-fired plant using Powder River Basin coal or lignite. We continue to pursue IGCC for our solid fuel plants, but we have concerns about our ability to reach an agreement in which the technology provider will guarantee the performance of IGCC with the higher-moisture, lower-Btu coals available in our region. We believe that ultra-super critical coal, with its excellent emissions performance, is also a very viable option."

SWEPCO will file for approval to construct and recover costs for these plants with regulators in Arkansas, Louisiana and Texas. The company expects to submit filings in June.

SWEPCO's generation plans are the result of a competitive bidding process initiated in December 2005. The process, outlined by the Louisiana Public Service Commission's Market-Based Mechanism Order, requires Louisiana utilities to implement competitive procurement processes to acquire or construct incremental generation capacity. The process solicited bids from all potential suppliers, including SWEPCO.

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