AEP Coal-plant Construction Faces New Hurdles

Texas regulators added two cost-related caveats to a final order approving American Electric Power Co's plan to build a coal-fired power plant in Arkansas while regulators in that state delayed action on the unit's air permit.

In its final order the Texas Public Utility Commission said Texas customers of AEP's Southwestern Electric Power Co (SWEPCO) unit will pay no more their share of the $1.52 billion price tag to build the 600-megawatt John W Turk Jr. coal-fired plant in Fulton, Arkansas.

"This cap on the capital cost of the Turk plant limits the financial risk to Texas ratepayers," the order said.

Texas regulators, who voted last month to approve the plant, also limited the amount of future carbon-mitigation costs than can be passed to Texas ratepayers at $28 per ton through 2030.

Estimated costs for carbon mitigation ranged from $13 to $70 per ton, with the average between $30-$45, the order said.

SWEPCO spokesman Scott McCloud said the utility is evaluating the final order and had no comment on whether the company would file an appeal.

Commissioner Julie Parsley, who voted against SWEPCO's plan, said both stipulations "are not legally enforceable" on future commissions.

Meanwhile, issuance of an air permit for Turk, tentatively approved by the air division of the Arkansas Department of Environmental Quality, will be delayed from the third quarter, McCloud said, after that agency scheduled a second public hearing to allow comment on SWEPCO's plan to control mercury emissions.

While not required, the agency decided to hold a hearing next month on the mercury issue after a federal court ruling halted implementation of the Clean Air Mercury Rule.

AEP revised its Turk application to comply with Arkansas mercury emission rules leading to a need for additional public input. No permit can be issued until response to public comments are completed, an agency spokesman said.

Rising construction costs and climate-change worry have led utilities to cancel dozens of proposed coal-fired units in the past two years. Even so, more coal plants are being built in the U.S. now than two decades, according to a government report.

About 29 coal plants with a capacity exceeding 15,000 MW are under construction. Another 20 projects have permits or are near construction. Operation of the Turk plant is expected in the second half of 2012.