As
previously disclosed,
the U.S. Environmental
Protection Agency (“EPA”), the states of New York, Connecticut, New Jersey,
Vermont, New Hampshire, Maryland, Rhode Island and Massachusetts (the “States”)
and fourteen special interest groups alleged that Appalachian Power Company
(APCo), Columbus Southern Power Company (CSP), Indiana Michigan Power Company
(I&M) and Ohio Power Company (OPCo) (collectively, “the AEP Subsidiaries”)
modified certain of their coal-fired generating plants in violation of the
New
Source Review requirements of the Clean Air Act. The EPA filed its complaints
against the AEP Subsidiaries in two cases pending in the U.S. District Court
for
the Southern District of Ohio.
On
October 9, 2007, American Electric Power Company (“AEP”) and the AEP
Subsidiaries announced that they have reached a settlement agreement with
the
EPA, the U.S. Department of Justice (“DOJ”), the States and the special interest
groups. Under the settlement agreement, AEP agreed to annual sulfur dioxide
(SO2) and nitrogen oxide (NOX) emission limits for sixteen of the AEP
Subsidiaries’ coal-fired power plants located in Indiana, Kentucky, Ohio,
Virginia and West Virginia. In addition to completing the installation of
previously announced environmental retrofit projects at many of the plants,
including the installation of flue gas desulfurization (FGD or scrubbers)
equipment at Kentucky Power Company’s Big Sandy Plant and at OPCo’s Muskingum
River Plant by the end of 2015, AEP agreed to install selective catalytic
reduction (SCR) and FGD emissions control equipment on AEP Generating Company’s
and I&M’s jointly owned generating units at the Rockport Plant. Unit 1 at
the Rockport Plant will be retrofit by the end of 2017, and Unit 2 will be
retrofit by the end of 2019. AEP also agreed to install selective non-catalytic
reduction, a NOX-reduction technology, by the end of 2009 at APCO’s Clinch River
Plant.
AEP
also
agreed to operate its SCRs year round during 2008 at APCo’s Mountaineer Plant,
OPCo’s Muskingum River Plant and APCo’s and OPCo’s jointly owned Amos Plant, and
agreed to plant-specific SO2 emission limits for APCo’s Clinch River Plant and
OPCo’s Kammer Plant.
Under
the settlement agreement, AEP
will pay a $15 million civil penalty to the DOJ and provide $36 million for
environmental projects coordinated with the federal government and $24 million
to the States for environmental mitigation.
The
settlement agreement, upon approval by the U.S. District Court for the Southern
District of Ohio, will resolve all issues related to various parties’ claims
against the AEP Subsidiaries in the two pending New Source Review cases.
The
settlement agreement is in the form of a consent decree and has been lodged
with
the U.S. District Court. The settlement agreement is subject to final approval
by the Court, and is attached as Exhibit 10.1 and incorporated herein by
reference.