Faced with the choice of retiring or refueling with natural gas, American Electric Power (AEP) said Thursday it expects to retire its 585 MW coal-fueled Muskingum River Plant Unit 5 in Beverly, OH, in 2015.

After reaching an agreement with other parties in February to modify the company's 2007 New Source Review Consent Decree, which gave the company the option to retire Muskingum River Unit 5 or refuel it with natural gas (see Daily GPI, Feb. 26), AEP has decided it is unlikely to make the capital investment to refuel the unit due to the cost of compliance with environmental regulations and current market conditions.

The landmark settlement is the result of a lawsuit originally filed in federal court in Ohio in 1999, and it is a modification of the 2007 settlement that emanated from that case. Eight states were involved:(Indiana, Kentucky, Michigan, Ohio, Massachusetts, New York, Connecticut and New Jersey), along with the EPA and 13 citizen groups, including the Sierra Club, Natural Resources Defense Council and various state action councils.

AEP will record a nonoperating, pre-tax impairment charge for Muskingum River Unit 5 of approximately $150 million to $170 million in the second quarter of 2013, but the company said this will not impact its 2013 operating earnings guidance range of $3.05 to $3.25 per share, and the company continues to expect to deliver an earnings growth rate of 4-6% based upon 2013 operating earnings guidance.

The company had previously announced its intent to retire Muskingum River Units 1-4 (840 MW) in 2015. Approximately 95 employees working at Muskingum River Plant Units 1-5 will be impacted and AEP said it will work to provide displaced employees with opportunities to apply for jobs at other AEP facilities.

As part of the larger plan, AEP had previously announced the planned retirement of 2,538 MW of coal-fueled generation owned by AEP Ohio in Ohio and West Virginia by the end of 2015. The addition of Muskingum River Unit 5 brings AEP Ohio's total retirements to 3,123 MW. The remaining 10,725 MW of AEP Ohio-owned generation -- including 2,427 MW slated to be transferred to Appalachian Power and Kentucky Power following state regulatory approvals -- will consist mostly of low-emitting, fully controlled coal-fueled plants, natural gas-fueled combined cycle and combustion turbines, and a small hydro plant.

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