AEP to retire Big Sandy coal-fired Unit 2

Kentucky Power, a subsidiary of American Electric Power (NYSE: AEP), said it plans to retire the 800 MW Unit 2 at the Big Sandy coal-fired power plant by 2015 and transfer $530 million in costs associated with 50 percent ownership of the Mitchell Generation Station from AEP Ohio.

The latest filing replaces a filing for a scrubber system for Unit 2 that was withdrawn. AEP said the filing could result in an 8 percent increase on customers’ bills. By comparison, the scrubber system would have resulted in a roughly 31 percent increase on monthly bills.

“At this time, and after much study and evaluation, we think this filing represents the best path forward for the company to meet both its environmental and customer obligations. While it does represent an increase in customer’s rates of about eight percent, it is substantially less than our previous filing and will save our customers millions of dollars while bringing us into environmental compliance,” said Greg Pauley, president and chief operating officer of Kentucky Power.

“When we withdrew our scrubber filing last summer, we stated that we felt new opportunities were emerging that would allow us to meet our obligations at a lower cost. The possibility of transferring these Mitchell Units was among those opportunities and doing so will allow us to reduce the impact on customers’ bills,” Pauley said.

The Mitchell Plant is located near Moundsville, W.Va., and has a total generating output of 1,560 MW. Kentucky Power seeks to obtain 50 percent of the output of Mitchell’s 770 MW Unit 1 and 790 MW Unit 2, for a total transfer of 780 MW, which will cover the lost capacity from Big Sandy Unit 2. Both Mitchell units are equipped with advanced environmental controls, including flue gas desulfurization systems (FGD), or scrubbers. The other 50 percent ownership in both units would be transferred to Appalachian Power Co. (APCO), another AEP subsidiary, pending approval of APCO’s regulatory authorities. APCO will operate and maintain the Mitchell Plant.

In addition to approval from the Kentucky Public Service Commission, the transfer also requires the approval of the Federal Energy Regulatory Commission.

Kentucky Power has yet to decide the future of Big Sandy’s 278 MW Unit 1. A filing to cover the future generating capacity of that unit will be submitted to the Kentucky Public Service Commission sometime in 2013. Kentucky Power will also consider the possibility of converting Unit 1 to natural gas. Unit 1 is scheduled to be retired as a coal-fired unit by 2015.

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