LPSC approves SWEPCO formula rate plan

SHREVEPORT, La.— American Electric Power (NYSE:AEP) subsidiary Southwestern Electric Power Company (SWEPCO) today announced the Louisiana Public Service Commission’s (LPSC) approval of a formula rate plan for the company’s 176,000 Louisiana customers. The LPSC unanimously approved the plan in its April 16 regular session. Commission approval follows the announcement of an agreement regarding the plan between SWEPCO and the LPSC staff reached last month.

Under the plan, SWEPCO will implement base rates based on a formula and have its earnings reviewed annually. The initial impact on base rates will be determined after the Commission’s review of SWEPCO’s earnings filed each April. Adjusted rates will be effective with August customer bills. A request to recover finance charges on new generation construction will be addressed in a future filing. Cost recovery of the John W. Turk power plant, the Company’s proposed base load generating unit, also will be addressed through a separate filing.

Separate from base rates, the cost of fuel will continue to be handled as it has historically with no profit to the company. Fuel costs are adjusted regularly throughout the year, subject to regulatory review.

As part of the plan, SWEPCO agreed to a $5 million credit rider effective with August 2008 bills. As a result of the rider, residential customers using 1,000 kWh will see a decrease of approximately $0.37 per month. The three-year agreement also lowers depreciation rates for some company assets.

“We are pleased at the Commission’s ruling to adopt a formula rate structure for SWEPCO, replacing the lengthy and costly process associated with traditional rate cases,” said Venita McCellon-Allen, SWEPCO president and chief operating officer. “While the LPSC will continue its regulation of SWEPCO customers’ rates, the new structure provides an efficient process for timely recovery of investments in infrastructure that maintain and improve reliability for our customers.”

SWEPCO’s rate of return is set at 10.565 percent under the terms of the plan. Previously the company was allowed to earn 11.1 percent. The formula rate plan contains a sharing provision between the company and customers, triggering rate adjustments if the earned return is outside an established “bandwidth” of 10.015% to 11.115%.

SWEPCO serves over 464,000 customers in three states, including 112,000 in western Arkansas, 176,000 in Northwest Louisiana, and 176,000 in East Texas and the North Texas Panhandle.