AEP Cuts Amount of Coal-Fired Power Generation It Will Shut

American Electric Power Co. (AEP), the largest U.S. coal user, reduced by 13 percent the amount of coal-fired power generation it will shut, saying customers in the state of Kentucky may provide the $940 million it needs to keep one of the plants operating.

The company plans to close electricity plants with about 5,138 megawatts of capacity, Chief Executive Officer Nick Akins said at an investor conference in New York today. The Columbus, Ohio-based company said in June that new U.S. Environmental Protection Agency rules would force it to retire as much as 5,909 megawatts of capacity.

The difference stems from the company’s decision in December to seek a 31 percent rate increase to pay for environmental equipment needed to keep its Big Sandy Unit 2 in Kentucky operating, Akins said later in an interview. State regulators have indicated American Electric may be able to recover from customers the almost $1 billion needed to keep the unit operating, he said.

A U.S. air-pollution rule to reduce power-plant emissions that cross state lines was halted by a federal court last year. Separate regulations to cut mercury pollution are scheduled to go into effect in 2015.

FirstEnergy Retirements

Akins has asked for more time to phase in the regulations and in Nov. 30 testimony to federal energy regulators said the company would have to spend $6.7 billion in the next three years to comply with the rules.

Reversing the Environmental Protection Agency's rules to combat emissions that cross state lines would be a blow to Public Service Enterprise Group Inc., which spent $1.3 billion since 2007 to clean up two coal-fired New Jersey power plants to meet national air-quality standards set into law two decades ago. Photo: Emile Wamsteker/Bloomberg Close

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Reversing the Environmental Protection Agency's rules to combat emissions that cross state lines would be a blow to Public Service Enterprise Group Inc., which spent $1.3 billion since 2007 to clean up two coal-fired New Jersey power plants to meet national air-quality standards set into law two decades ago. Photo: Emile Wamsteker/Bloomberg

American Electric plans to shut power plants that generate about 2,600 megawatts and sell electricity at state-regulated rates, plus another 2,538 megawatts owned by a unit that sells power at wholesale-market rates, Akins said.

The company in a Dec. 7 presentation listed 12 units with expected retirement in 2014 that are owned by its utility subsidiaries. Akins, in the interview, declined to say which are critical to preventing blackouts or recovering from them, conditions that may allow plants to operate another year or two under waivers.

Cost to refit coal-burning plants that American Electric expects to keep operating will be less than previously estimated because standards for particulate matter such as soot and vapor won’t be as rigorous as expected, Akins said.

FirstEnergy Corp. (FE), an Akron-Ohio based utility owner, has announced it will shut 3,349 megawatts of coal-fired power plants this year.

Arch Coal Inc. (ACI), the fourth-largest U.S. coal producer by market value, said today it expects demand for the fuel will decline by 50 million tons or more this year as mild weather and low natural-gas prices curb use by power companies.

To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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