Washington (Platts)--11Jul2007

The largest coal-fired generator in the US late Tuesday said it will
support legislation to be introduced Wednesday by the chairman of the US
Senate Energy and Natural Resources Committee that would cap US emissions of
greenhouse gases at 1990 levels by 2030.  

     Michael Morris, chairman and CEO of American Electric Power, is expected
to join New Mexico Democrat Jeff Bingaman and co-sponsor Senator Arlen
Specter, Republican-Pennsylvania, at a Washington briefing to unveil the Low
Carbon Economy Act of 2007, which takes an economy-wide, market-based approach
to climate change. 

     The bill would start with a 6.65 billion ton cap on GHG emissions in 2012
and tighten the cap by 1% to 2% each year before hitting 2006 levels by 2020
and then 1990 levels by 2030, industry sources said. 

     Support from AEP, which owns 36,000 MW of generation and serves 11
states, indicates that the Bingaman-Specter bill would be structured in a way
that blunts the high cost of compliance for industries dependent on fossil
fuels. Other utilities expected to come out in favor of the Bingaman-Specter
climate bill are Duke Energy, Public Service of New Mexico and Exelon.  

     The legislation would award emissions allowances on based on GHG levels,
according to sources. Industry sectors would get 53% of the allowances but
that amount would decrease over time. An auction of 24% of the emission
allowances would begin in 2012 and increase over time. In addition, the
Bingaman-Specter legislation would offer a $12/ton GHG "safety valve" price,
or a market price cap on emission allowances. 

     The bill "sets reasonable and achievable reduction targets" and "provides
full flexibility through trading, banking, and the use of offsets," Columbus,
Ohio-based AEP said. 

     The bill would encourage carbon capture and sequestration on new and
existing coal-fired power plants because it will mitigate the cost of
installing the new technologies with emission allowances, AEP said.

     Another key selling point for AEP was inclusion of a trade proposal the
utility crafted with International Brotherhood of Electrical Workers in an
effort to get developing nations to cut their GHG emissions and not undermine
the US economy.

     Any climate legislation would go before the Senate Environment and Public
Works Committee, which is preparing its own comprehensive cap-and-trade bill
under an alliance between Senators Joseph Lieberman, Independent-Connecticut,
and John Warner, Republican-Virginia.

		--Cathy Cash, cathy_cash@platts.com