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I&M REACHES AGREEMENT TO LOWER CUSTOMER COSTS FOR ENVIRONMENTAL RETROFITS

February 25, 2013

FORT WAYNE, Ind., February 25, 2013 - Indiana Michigan Power (I&M), a subsidiary of American Electric Power (NYSE:AEP), has reached an agreement that will allow I&M to utilize a different compliance strategy at the Rockport Power Plant, located in Spencer County, IN.  This compliance strategy will substantially reduce the cost for I&M to comply with EPA requirements, resulting in significant savings to I&M's customers.

Prior to this agreement, I&M had filed with the Indiana Utility Regulatory Commission requesting approval for a dry scrubber on one of the two 1300 MW Rockport units in order to satisfy EPA requirements.  Estimates for the single dry scrubber project were $1.4 billion.  Given this high cost, I&M continued to investigate alternatives and ultimately identified lower cost technology, dry sorbent injection (DSI).

With complementary goals of cleaner air and minimum customer rate impact, I&M entered into negotiations with the U.S. EPA, several northeastern states, and various environmental groups to clarify the type of environmental controls required at I&M’s Rockport Plant.

Under the agreement reached, I&M will install DSI control technology on both 1300 MW Rockport units.  The cost of installing DSI is less than one-fifth of the cost of the dry scrubber project on a single unit and will meet all environmental regulations. 

I&M is pleased that we were able to successfully clarify the existing agreement because it will lower the cost of complying with environmental regulations.  This action is consistent with I&M’s commitment to be a good steward of the environment and to keep cost increases to a minimum while still allowing us to provide safe and reliable service.          

“This is a great day for I&M, our customers, and the environment, as we will achieve cleaner air at a lower overall cost,” said Paul Chodak, I&M’s president.  “Investments driven by changes in the utility industry will require increases in our rates, but our strategy is to increase rates as little as possible in order to maintain our lower rates and the competitive advantage that our customers enjoy today."

As part of the agreement, I&M will install an additional 200 MWs of wind energy, provide additional mitigation funding to the states, and create a fund to support other small scale renewable projects.  I&M will also refuel or retire Tanners Creek Unit 4 and accept more restrictive system-wide emission caps on the AEP units subject to the consent decree.  Further emission reductions will be required at Rockport in the next decade. 

The agreement is subject to review and approval by a federal court, which is expected to occur within the next few months.  The existing filing with Indiana state regulators requesting approval for installation of a dry scrubber on one unit is being withdrawn and will eventually be replaced with filings requesting approval for DSI on both units.

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Indiana Michigan Power (I&M) is headquartered in Fort Wayne, and its 2,500 employees serve more than 582,000 customers. It operates 3,595 MW of coal-fired generation in Indiana, 2,110 MW of nuclear generation in Michigan and 22 MW of hydro generation in both states.  The company also provides its customers 150 MW of purchased wind generation.

I&M is a unit of American Electric Power (NYSE: AEP), one of the largest electric utilities in the United States, delivering electricity to more than 5 million customers in 11 states. AEP ranks among the nation’s largest generators of electricity, owning nearly 39,000 megawatts of generating capacity in the U.S. AEP also owns the nation’s largest electricity transmission system, a nearly 39,000-mile network that includes more 765-kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined. AEP’s transmission system directly or indirectly serves about 10 percent of the electricity demand in the Eastern Interconnection, the interconnected transmission system that covers 38 eastern and central U.S. states and eastern Canada, and approximately 11 percent of the electricity demand in ERCOT, the transmission system that covers much of Texas. AEP’s utility units operate as AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana and east Texas). AEP’s headquarters are in Columbus, Ohio.

Sarah Bodner
Indiana Michigan Power
(260) 408-3421
slbodner@aep.com

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