AEP says settles long-running U.S. acid rain suit

By Bernie Woodall

LOS ANGELES (Reuters) - U.S. power generator American Electric Power has settled an eight-year legal battle over acid rain with the U.S. government and other plaintiffs, but the agreement will not change the company's 2007 earnings, a spokesman said on Monday.

It agreed to pay $15 million in civil penalties and $60 million in pollution cleanup costs to end the long-running dispute about whether AEP illegally modified power plants and spewed acid rain producing chemicals across the northeastern United States.

AEP's biggest expense as a result of the suit will not start until 2017, spokesman Pat Hemlepp told Reuters by telephone. The company will spend $1.6 billion, in current dollars, primarily to upgrade a major coal-fired power plant in southern Indiana.

"That is the biggest portion beyond anything we had already announced or committed to," he said, adding that recent financial forecasts and capital spending plans would not be affected by the deal.

The Associated Press had quoted two people as saying AEP would pay $4.6 billion to cut pollution, but Hemlepp said the figure was not accurate.

"This ends all litigation on this," Hemlepp said, adding that the deal would be formally announced on Tuesday morning.

AEP admits no wrong in the settlement. Hemlepp said that the company decided it was best to settle the suit rather than to drag it out any further.

The suit, brought in 1999, accused AEP of expanding or modifying its older plants without installing pollution-control equipment that would have curbed emissions that cause acid rain.