American Electric Power to Settle Environmental Violation Lawsuit

Apr. 27 - The Columbus Dispatch, Ohio

American Electric Power's top executive said yesterday that the company is in discussions with the federal government to settle a lawsuit concerning alleged Clean Air Act violations at the company's power plants.

The nearly 6-year-old suit is like one that First Energy settled last month for more than $1.1 billion "Is there a chance? I'd say yes," AEP Chairman, President and Chief Executive Michael G. Morris said yesterday after the company's annual shareholders meeting. "We're seeking a bit more balance in what the other side would have us do. We continue to believe that we did not violate" the law.

Morris said AEP has participated in the meetings at the request of U.S. District Judge Edmund Sargus in Columbus, who is scheduled to preside over a trial this summer.

Morris indicated AEP is prepared to go to trial.

"We would welcome a settlement if it's possible, but we're very confident of our legal position," he said.

The Justice Department sued several utilities in 1999 after the Environmental Protection Agency determined that they had made modifications to their power plants that resulted in increased pollution.

The companies should have applied for permits and installed pollution controls, the government argued. The utilities say the work was routine maintenance.

The government has settled with nine companies, including Virginia Electric Power Co. which paid $1.2 billion, the largest settlement.

During the annual meeting in Tulsa, Okla., Morris recounted progress AEP had made in the past year.

"Last year, we completed our efforts to refocus the company on what we do best -- generate, transmit and distribute electricity," he said.

Morris cited several areas where the company had delivered on promises to shareholders, including:

--Profits: Excluding special items, AEP earned $2.33 per share in 2004, beating its forecast of between $2.20 and $2.30.

--Shedding non-core assets: By the end of 2004, AEP had sold most of its assets that weren't related to its utility business. They included plants in the United Kingdom and natural-gas pipeline businesses in Louisiana and Texas.

--Environmental initiatives: The board produced a detailed report on the potential financial impact to AEP of tougher clean-air standards and committed to building a "clean-coal" generating plant by 2010.

--Resolving investigations into AEP's past energy-trading practices: The company agreed in January to pay $81 million to end probes by the Department of Justice, the U.S. Commodity Futures Trading Commission and the Federal Energy Regulatory Commission.

Morris said that shareholders benefited from the moves, noting that the stock price closed Monday at $35.13, up from about $30 a year ago.

He said a dividend increase is possible this year. It was cut to 35 cents per share in 2003 but isn't likely to be returned to 60 cents, as in the past, he said.

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