PUCT Approves Settlement in AEP Texas North Company Rate Proceeding

AUSTIN, Texas, May 24 /PRNewswire-FirstCall/ -- American Electric Power subsidiary AEP Texas North Company (TNC) announced that the Public Utility Commission of Texas (PUCT) has approved the unanimous settlement of a request by TNC to increase the rates it charges Retail Electric Providers (REPs) for transmission and distribution services.

Approval of the settlement should result in no increase in charges by the REPs to residential and small commercial customers. TNC's charges to the REPs for large commercial and industrial customers will increase by approximately 17 percent as compared to the 20 to 40 percent increase in rates originally requested.

TNC also agreed to contribute an additional $50,000 annually to the Texas Association of Community Action Agencies to help low-income electricity users.

The settlement calls for a $7.5 million increase in rates, which along with the expiration of $6.2 million in merger credits results in a cash increase of $13.7 million. TNC had requested a $15.8 million rate increase along with the expiration of the $6.2 million in merger credits for a total revenue increase of $22 million.

Although TNC's requested overall revenue increase has been reduced from $22 million to $13.7 million, a reduction in the company's requested increase in depreciation expense offsets much of the revenue decrease from an earnings perspective. The end result of the settlement is a projected pre-tax earnings increase of $11.7 million, as compared to the $12.6 million previously requested, or 93 percent of the TNC request.

"The settlement is a very good outcome for customers and the company," said Charles Patton, AEP Texas president and chief operating officer. "It means residential and small commercial customers should see no impact, and large commercial and industrial customers should see a smaller increase than the amount previously requested. At the same time, TNC will see receive an increase in earnings that is definitely needed."

Implementation of the new charges to the REPs will begin with the June billing cycle.

TNC is a part of AEP Texas, a unit of American Electric Power, which delivers electricity to 900,000 homes, businesses and industries in west and south Texas. AEP Texas provides regulated energy delivery service to consumers, regardless of which Retail Electric Provider they choose. The region headquarters is in Corpus Christi.

American Electric Power is one of the largest electric utilities in the United States, delivering electricity to more than 5 million customers in 11 states. AEP ranks among the nation's largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the U.S. AEP also owns the nation's largest electricity transmission system, a nearly 39,000- mile network that includes more 765 kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined. AEP's transmission system directly or indirectly serves about 10 percent of the electricity demand in the Eastern Interconnection, the interconnected transmission system that covers 38 eastern states and central U.S. states and eastern Canada, and approximately 11 percent of the electricity demand in ERCOT, the transmission system that covers much of Texas. AEP's utility units operate as AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana and east and north Texas). AEP's headquarters are in Columbus, Ohio.

This report made by AEP and its Registrant Subsidiaries contains forward- looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Although AEP and each of its Registrant Subsidiaries believe that their expectations are based on reasonable assumptions, any such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. Among the factors that could cause actual results to differ materially from those in the forward-looking statements are: electric load and customer growth; weather conditions, including storms; available sources and costs of, and transportation for, fuels and the creditworthiness of fuel suppliers and transporters; availability of generating capacity and the performance of AEP's generating plants; AEP's ability to recover regulatory assets and stranded costs in connection with deregulation; AEP's ability to recover increases in fuel and other energy costs through regulated or competitive electric rates; AEP's ability to build or acquire generating capacity when needed at acceptable prices and terms and to recover those costs through applicable rate cases or competitive rates; new legislation, litigation and government regulation including requirements for reduced emissions of sulfur, nitrogen, mercury, carbon, soot or particulate matter and other substances; timing and resolution of pending and future rate cases, negotiations and other regulatory decisions (including rate or other recovery for new investments, transmission service and environmental compliance); resolution of litigation (including pending Clean Air Act enforcement actions and disputes arising from the bankruptcy of Enron Corp. and related matters); AEP's ability to constrain operation and maintenance costs; the economic climate and growth in AEP's service territory and changes in market demand and demographic patterns; inflationary and interest rate trends; AEP's ability to develop and execute a strategy based on a view regarding prices of electricity, natural gas and other energy-related commodities; changes in the creditworthiness of the counterparties with whom AEP has contractual arrangements, including participants in the energy trading market; actions of rating agencies, including changes in the ratings of debt; volatility and changes in markets for electricity, natural gas and other energy-related commodities; changes in utility regulation, including the potential for new legislation or regulation in Ohio and membership in and integration into regional transmission organizations; accounting pronouncements periodically issued by accounting standard-setting bodies; the performance of AEP's pension and other postretirement benefit plans; prices for power that AEP generates and sell at wholesale; changes in technology, particularly with respect to new, developing or alternative sources of generation; other risks and unforeseen events, including wars, the effects of terrorism (including increased security costs), embargoes and other catastrophic events.