Las Vegas (Platts)--15Apr2008

American Electric Power will continue to try and build integrated
gasification combined cycle power plants using coal, but it is being forced to
do some additional work following rejection of plans in Ohio and Virginia,
said Nicholas Akins, executive vice president for generation at AEP.

The Virginia State Corporation Commission on Monday denied a request by
AEP utility Appalachian Power to build a 629-MW, coal-fired IGCC plant in West
Virginia, the costs of which were to be shared with the company's customers in
Virginia. The West Virginia PUC had approved the project in March, but with
the SCC rejection, "we'll have to head back to the drawing board" to examine
options for Appalachian Power, Akins said Monday at Platts' Global Power
Markets conference in Las Vegas.

AEP spokeswoman Melissa McHenry on Monday said the company plans to
ask the SCC to reconsider its decision. AEP would not be able to build the
IGCC plant without collecting a portion of its $2.23 billion cost from
Virginia customers, she said.

The SCC ruling followed an Ohio Supreme Court decision earlier this year
that has cast doubt about AEP's ability to build a planned IGCC plant in Meigs
County, Ohio.

Akins said policymakers and regulators need to recognize that coal-fired
generation will have to play a part in bridging a "baseload gap" that is on
the horizon, with capacity reserve margins declining in many parts of the
country. "It is important to keep every option available," including gas-fired
generation, new nuclear capacity and coal-fired generation, for energy
security purposes, he said.

Akins mentioned that AEP has an aging coal-fired generation fleet with
some plants approaching 50 years old, and that the company has not added a
baseload power plant since 1991. The average cost for its entire generation
fleet, with 38,000 MW of capacity, is around $300 to $500/kW, and the cost of
the IGCC plant in West Virginia is estimated at around $3,500/kW, he said. The
company intends to file revised cost information with the SCC, McHenry said.

Costs for a traditional pulverized coal plant have risen from about
$1,200/kW in 2002 to $3,000/kW in 2008, added Joseph Esteves, LS Power CFO.
In an IGCC plant, coal is converted into a synthethic gas that moves through
pollution removal equpment before being burned in a turbine.

Other speakers at the conference said regulators should not place
moratoriums on certain types of power plants. "In my view, gas-fired
generation is critical to filling the baseload gap," said Gregory Doody,
executive vice president and general counsel with Calpine, which has a large
fleet of gas-fired power plants.

--Tom Tiernan, tom_tiernan@platts.com