COLUMBUS, Ohio, June 29, 1998 -- A proposal for utilities to reduce nitrogen oxide (NOx) emissions, announced recently by six governors representing Midwest, mid-Atlantic and Southeast states, will result in "an expensive capital construction program, but is more reasonable," than the extreme proposal from the U. S. Environmental Protection Agency (EPA), according to James Markowsky, executive vice president-power generation for AEP.

The governors are requesting EPA to adopt a two-phase approach to attaining the ozone standard, with Phase I consisting of mandatory NOx emission reduction steps from utility sources: 55 percent by April 2002 and 65 percent by April 2004. A one-year extension to these dates will be considered to avoid energy supply disruptions, resulting from the large construction effort. Phase II, to be implemented by April 2007, follows with further emission reductions to be determined by air quality modeling and monitoring to meet the new eight-hour ozone standard.

In contrast, EPA´s proposal would establish a cap on allowable NOx emission in the 22 easternmost states and the District of Columbia, with the limits based on an 85 percent reduction of NOx emissions from electric utility sources, as well as controls on large industrial boilers. The purported purpose of the action is to help Northeast states meet air quality standards for ozone, which is formed when NOx combines in a complex chemical reaction in the atmosphere with volatile organic compounds on hot, sunny days.

"To meet the 65 percent reduction requirement, AEP will spend up to $1 billion to retrofit over half of its coal-fired generation with advanced emission control equipment, including selective catalytic reduction and selective non-catalytic reduction technology," said Markowsky. "This is a major expense, but it´s more reasonable than EPA´s proposal, which will cost us an additional $600 million if imposed."

Markowsky said that the actual mix of control technologies is uncertain and will depend in part on the success of a first-of-its-kind NOx control demonstration at AEP´s Cardinal Unit 1 in Ohio. However, the ultimate control strategy is expected to be weighted toward selective catalytic reduction (SCR) controls.

Markowsky indicated that EPA´s more stringent proposal weighs heavily on coal-fired power plants. "Depending on the stringency of the control requirement, some older, smaller coal-fired power plants may be switched to burn natural gas during the ozone season. The EPA proposal is one part of a broad regulatory agenda directed at the utility industry. Taken together, this agenda has national implications.

"The governors are wise to offer a more reasonable approach to address air quality concerns. We´re getting close to the time when EPA will be determining this country´s energy policy by fiat," Markowsky said.

"This is particularly troublesome given the fact that utility sources are not the predominant source of ozone pollution in the urban areas of the Northeast, or nationwide, for that matter. As their own documents clearly reveal, the cause of the ozone problem in the Northeast is the cumulative effect of millions of vehicles driving on the clogged streets of their cities."

AEP, a global energy company, is one of the United States´ largest investor-owned utilities, providing energy to 3 million customers in Indiana, Kentucky, Michigan, Ohio, Tennessee, Virginia and West Virginia. AEP has holdings in the United States, the United Kingdom, China and Australia. Wholly owned subsidiaries provide power engineering, energy consulting and energy management services around the world. The company is based in Columbus, Ohio. On Dec. 22, 1997, AEP announced a definitive merger agreement for a tax-free, stock-for-stock transaction with Central and South West Corp., a public utility holding company based in Dallas.