AEP CEO sees W.Va. in clean coal lead

By Michael Erman

NEW YORK (Reuters) - American Electric Power Co. Inc.'s (AEP.N: Quote, Profile, Research, Stock Buzz) chief executive on Monday said he expects West Virginia will likely be the first state where the company builds a clean coal plant because of an easier regulatory process in the state.

AEP hopes to build two integrated gasification combined cycle (IGCC) coal plants, which turns coal into a cleaner-burning gas, thus reducing emissions.

But the company has said it will only build the plants if it can recover the construction and operation costs through rate increases or some other mechanism.

"West Virginia may be cleaner in that you'll get an order from the commission saying you'll go forward and build this facility, and it won't have the same legal challenge that I'm afraid an Ohio order will," AEP CEO Michael Morris said, speaking at the Reuters Global Energy Summit in New York.

The company is considering sites in Ohio, West Virginia and Kentucky. Although it started the regulatory process in Ohio first, the company expects the matter to be slowed by a multi-phase approval in the state as well as expected legal challenges.

Morris expects that AEP could receive an order on an IGCC plant from West Virginia regulators in the latter half of this year or the first half of 2007.

"West Virginia may jump ahead in a regulatory sense and, fortunately, the base work we're doing for the Ohio facility is transportable to the West Virginia site," he said.

At issue in Ohio is whether the state's Public Utility Commission has the authority to approve a cost recovery for the plant. Morris said the first phase of the recovery process in Ohio took longer than the company would have liked.

AEP still has plans to build two IGCC plants, Morris said, but the location of the second plant is also not yet determined.

He said that AEP would probably build the plant in Kentucky instead of Ohio if the company completes the regulatory process in Kentucky first.

Shares of AEP rose 36 cents, or 1.1 percent, to $33.36 in morning trading on the New York Stock Exchange.