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AEP, ERCOT agree on interim contracts for seven Texas power plants

COLUMBUS, Ohio, Oct. 16, 2002 — American Electric Power (AEP) and the Electric Reliability Council of Texas (ERCOT) have reached interim agreements to keep seven gas-fired power plants in the ERCOT region operational until the end of the year.

The power stations will work under “reliability must run” or “RMR” contracts.

An RMR plant is one required to ensure the reliability of the power grid, even if electricity from that plant is not required to meet market needs. The interim contracts give ERCOT until the end of the year to complete more in- depth system studies before establishing 2003 RMR requirements.

ERCOT, one of 10 regional electric reliability councils in the U.S., is the corporation that administers Texas’ electric load and oversees operation of approximately 70,000 megawatts of generation and more than 37,000 miles of transmission lines.

The financial details of the RMR agreements with the AEP-owned West Texas Utilities and Central Power and Light companies were not made public. The AEP subsidiaries operate the gas-fired plants covered by these contracts.

AEP announced in September that it would mothball up to 16 power plants in ERCOT unless they were needed for reliability purposes. On Oct. 1, AEP said eight plants were under consideration by ERCOT for RMR status, and eight others would be closed.

The 491-megawatt (MW) Victoria power station was identified in an earlier announcement as a possible RMR plant. However, ERCOT reevaluated the significance of the plant and determined it was not needed for reliability. The 33 affected employees at Victoria will be eligible for severance and outplacement services.
“The interim contracts with ERCOT will allow us to get cost recovery for plants with RMR status at least until the end of the year,” said Eric van der Walde, executive vice president – wholesale for AEP. “We anticipate that negotiations for 2003 agreements will begin in November.”

Some employee reductions are anticipated at plants where all units are not covered by RMR contracts.

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

AEP is a wholesale marketer of energy commodities, utilizing its energy expertise and risk management skills to make optimal use of its generation, natural gas pipeline systems, natural gas storage, coal mines and inland barge fleet. AEP is also one of the largest electric utilities in the United States, with almost 5 million customers linked to AEP’s 11-state electricity transmission and distribution grid. 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