June 24, 2010 / 5:45 PM / 10 years ago

UPDATE 1-AEP says ruling won't stop Arkansas coal progress

* Construction continues at Turk plant in Hempstead County

* Utility to sell Arkansas output into wholesale market

(Updates brief, adds dateline, company comment)

HOUSTON, June 24 (Reuters) - A unit of American Electric Power Co Inc (AEP.N) said on Thursday that a negative ruling from the Arkansas Supreme Court ruling won’t stop construction of a $1.7 billion, 600-megawatt, coal-fired plant that is 28 percent complete.

The state supreme court rejected rehearing requests from AEP’s Southwestern Electric Power Co (SWEPCO) utility and the Arkansas Public Service Commission, letting stand a May ruling. That ruling upheld a lower court decision to overturn the 2007 commission action to approve construction of the John W. Turk Jr. coal plant in Hempstead County in Arkansas.

Without the certificate of need issued by the commission, SWEPCO can’t add costs to build and operate the coal plant to rates paid by its 113,500 customers in Arkansas.

SWEPCO said it will not seek a new certificate from the Arkansas commission due to substantial cost and delay.

Instead, SWEPCO notified utility regulators on Thursday that rather than recover Turk-related costs through customer bills, it will sell 88 megawatts previously designated to supply Arkansas customers into the wholesale market as allowed by state law, the company said in a release.

SWEPCO owns 73 percent, or 440 MW, of the output from Turk which is also designed to supply electricity to customers in Texas and Louisiana.

“We will continue construction in order to fulfill our obligations in Louisiana and Texas in the most cost-effective manner,” said Michael Morris, AEP chief executive officer. “We will secure other markets for the 88 megawatts of Turk plant capacity that would have served our Arkansas retail customers.”

The ultra-supercritical coal plant, expected to begin operating in October 2012, uses high temperature and pressure to burn coal while producing fewer emissions than traditional coal-fired power plants.

SWEPCO’s share of the plant cost is about $1.3 billion. About $1 billion has been spent on the Turk project, including $786 million by SWEPCO, the company said.

The Louisiana Public Service Commission and Public Utility Commission of Texas approved construction of the plant in 2008. SWEPCO began construction in 2009.

Opponents of the Turk project are challenging the project in two ongoing lawsuits; an appeal of the air permit issued in late 2008 by the Arkansas Department of Environmental Quality and a separate lawsuit filed by the Sierra Club and Audubon Arkansas against another government-issued permit.

Interest in coal-fired power plants, which produce about half the electricity consumed in the United States, surged when natural gas prices rose earlier in the decade.

Coal’s resurgence led to widespread opposition from environmental groups because coal-fired plants emit more carbon dioxide than any other fuel.

Public concern about greenhouse gas emissions and climate change has resulted in cancellations of dozens of coal plants as prospects for carbon regulation increased. (Reporting by Eileen O’Grady; Editing by Marguerita Choy)

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