SWEPCO Announces Plans for New Generation

SHREVEPORT, La., May 31, 2006 – American Electric Power’s (NYSE: AEP) Southwestern Electric Power Company (SWEPCO) today announced plans for short-term, mid-term and long-term generation to meet the electricity demands of the company’s customers.
“This is an important step toward addressing the growing electricity needs in this region,” said Michael G. Morris, AEP chairman, president and chief executive officer. “This plan, if approved by the regulatory commissions in the states, means AEP will move forward with approximately $1.4 billion of our planned investments in new generation resources to help us continue to economically meet the electricity needs of this part of the country. It also includes a diverse mix of generation types, including efficient coal-fueled generation, to help reduce long-term, over-reliance on a single fuel for electricity generation.”

AEP has included approximately $1.4 billion for new SWEPCO generation in its previously disclosed capital projections.

To meet SWEPCO’s more immediate power requirements for 2007 to 2009, the company will build up to 480-megawatts of simple-cycle natural-gas combustion turbine (CT) peaking generation in Tontitown, near Fayetteville, Ark., and will sign firm power purchase contracts with third-party suppliers for up to 450 megawatts. No external bids for long-term peaking power were submitted. Power suppliers will be named when contracts are finalized.

To meet additional electricity demand growth through 2010 and beyond, SWEPCO proposes to build a 480-megawatt, combined-cycle natural gas-fired plant at its existing Arsenal Hill Power Plant in Shreveport, La.

“Rapid growth throughout SWEPCO’s service territory, especially in northwest Arkansas, and the need to increase generating capacity in a relatively short amount of time to meet that demand, means we need to build additional peaking and combined-cycle natural gas plants,” said Nick Akins, president and chief operating officer of SWEPCO. “While these facilities will use natural gas, it’s important to note that natural gas will continue to be only 15 percent of our fuel mix.”

SWEPCO proposes to build a new base load coal- or lignite-fueled plant by 2011 to meet the longer-term generation needs of its customers.
“We believe that a coal- or lignite-fueled plant is the best choice for new base load generation to economically fuel the future growth of the economies in our region, allow us to remain a low-cost provider, and prevent over-reliance on natural gas for electricity generation as domestic national gas supplies are diminishing,” Akins said.

Two potential sites are being considered for the new coal- or lignite-fueled plant:  the company’s Henry W. Pirkey Power Plant in Hallsville, Texas, and a site near Fulton in Hempstead County, Ark., near Texarkana.

“We are continuing to evaluate both of these locations based on a number of factors, including the impact on the environment, available transmission, adaptation to generating technologies, and accommodation of unit size,” Akins said.

An announcement about the selected location is expected later this summer. This site selection will ultimately require the approval of the Arkansas, Louisiana and Texas public utility commissions.

Combustion technology for the plant also has not been finalized, however SWEPCO is considering Integrated Gasification Combined Cycle (IGCC) and ultra-super critical pulverized coal.

“We are strong supporters of IGCC clean-coal technology for new power generation as demonstrated by our parent company’s plans to build IGCC plants in two of its eastern states, however the coal used in our region requires different IGCC technology than the GE technology that will be used for AEP’s eastern IGCC plants,” Akins said.  “Ultra-super critical coal generation is a new, pulverized coal technology for this region that will have lower emissions than any existing coal-fired plant using Powder River Basin coal or lignite. We continue to pursue IGCC for our solid-fuel plant, but we have concerns about our ability to reach an agreement in which the technology provider will guarantee the performance of IGCC with the higher-moisture, lower-Btu coals available in our region. We believe that ultra-super critical coal, with its excellent emissions performance, is also a very viable option.”

SWEPCO will file for approval to construct and recover costs for these generation resources with the regulators in Arkansas, Louisiana and Texas. The company expects to submit the filings in June.

SWEPCO’s generation plans are the result of a Request for Proposals (RFP) competitive bidding process initiated in December 2005. The process, outlined by the Louisiana Public Service Commission’s (LPSC) Market-Based Mechanism Order (MBM), requires Louisiana utilities to implement competitive procurement processes to acquire or construct incremental generation capacity. The process, overseen by an Independent Monitor (IM), actively solicited bids from all potential suppliers, including SWEPCO. 

SWEPCO serves 454,000 customers in three states: 112,000 in western Arkansas, 174,000 in Northwest Louisiana, and 168,000 in East Texas. News releases and other information about SWEPCO can be found on the World Wide Web at http://swepco.com.

American Electric Power is 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 36,000 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 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).  American Electric Power, based in Columbus, Ohio, is celebrating its 100th anniversary in 2006.

This report made by AEP and certain of its subsidiaries contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934.  Although AEP and each of its registrant subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: electric load and customer growth; weather conditions, including storms; available sources and costs of, and transportation for, fuels and the creditworthiness of fuel suppliers and transporters; availability of generating capacity and the performance of AEP’s generating plants; the ability to recover regulatory assets and stranded costs in connection with deregulation; the ability to recover increases in fuel and other energy costs through regulated or competitive electric rates; new legislation, litigation and government regulation including requirements for reduced emissions of sulfur, nitrogen, mercury, carbon and other substances; timing and resolution of pending and future rate cases, negotiations and other regulatory decisions (including rate or other recovery for new investments, transmission service and environmental compliance);resolution of litigation (including pending Clean Air Act enforcement actions and disputes arising from the bankruptcy of Enron Corp.); AEP´s ability to constrain its operation and maintenance costs; AEP´s ability to sell assets at acceptable prices and on other acceptable terms, including rights to share in earnings derived from the assets subsequent to their sale; the economic climate and growth in AEP´s service territory and changes in market demand and demographic patterns; inflationary trends; AEP´s ability to develop and execute a strategy based on a view regarding prices of electricity, natural gas, and other energy-related commodities; changes in the creditworthiness of the counterparties with whom AEP has contractual arrangements, including participants in the energy trading market; changes in the financial markets, particularly those affecting the availability of capital and AEP´s ability to refinance existing debt at attractive rates; actions of rating agencies, including changes in the ratings of debt; volatility and changes in markets for electricity, natural gas, and other energy-related commodities; changes in utility regulation, including membership in regional transmission structures; accounting pronouncements periodically issued by accounting standard-setting bodies; the performance of AEP´s pension and other postretirement benefit plans; prices for power that AEP generates and sells at wholesale; changes in technology, particularly with respect to new, developing or alternative sources of generation, and other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes and other catastrophic events.

Scott McCloud
318 673-3532