Uncategorized

AEP to immediately mothball seven Texas power plants

ERCOT talks continue on status of another eight plants

COLUMBUS, Ohio, Oct. 1, 2002 — American Electric Power (AEP) will begin steps today 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. “It’s prudent for us to immediately begin work to mothball these plants.”

Plants that will be moved to inactive status beginning Tuesday are in Abilene, Point Comfort, Corpus Christi, Bronte and Stamford.

The mothballing process will take up to two months to complete, depending upon the specific plant. Another plant on the original list of 16 — the 5-MW Fort Stockton plant — has no staff and is inoperable.

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. Release dates for employees at mothballed plants will be staggered to accommodate the completion of tasks necessary for the transition of the plants to an inactive status.

Plants still being discussed in negotiations with ERCOT include:

B.M. Davis in Corpus Christi
Fort Phantom in Abilene
J.L. Bates in Mission
La Palma in San Benito
Laredo in Laredo
Rio Pecos in Girvin
San Angelo in San Angelo
Victoria in Victoria

AEP’s West Texas Utilities and Central Power and Light subsidiaries operate the 16 gas-fired plants in ERCOT. AEP plants in the Southwest Power Pool (SPP) region of Texas, which are operated by AEP’s Southwestern Electric Power Co. (SWEPCo) subsidiary, are not affected by the decision. Electricity competition has not been introduced in SPP.

American Electric Power is a multinational energy company with a balanced portfolio of energy assets. AEP, the United States’ largest electricity generator, owns and operates more than 42,000 megawatts of generating capacity in the U.S. and select international markets.

AEP is a wholesale energy marketer, ranking among North America’s top providers of wholesale power and natural gas with a growing wholesale presence in European markets. In addition to electricity generation, AEP owns and operates natural gas pipeline systems, natural gas storage, coal mines, and the fourth-largest inland barge company in the U.S. AEP is also one of the largest electric utilities in the United States, with almost 5 million customers linked to AEP’s wires. The company is based in Columbus, Ohio.

News releases and other information about AEP can be found on the World Wide Web at http://www.aep.com .

Source: American Electric Power