American Electric Power utility subsidiary AEP Southwestern Electric Power Company (SWEPCO) has signed a letter of intent to purchase the transmission and distribution assets of Valley Electric Membership Corporation (VEMCO). Valley Electric Board members unanimously approved a voluntary dissolution of the cooperative. Pending due diligence, SWEPCO will purchase the VEMCO assets for approximately $94 million, and assume certain other liabilities. The company also will provide payment for the VEMCO patronage capital at closing, currently estimated at about $30 million. A purchase agreement is expected by the end of the year, and a VEMCO membership vote to dissolve is anticipated in January or February.
If the transaction is completed, VEMCO customers will save a projected average of 20 percent annually as a result of SWEPCO's lower retail rates. SWEPCO's rates are currently 25 percent below the Louisiana average and 37 percent below the national average, based on average monthly residential use of 1,000 kilowatt-hours (kWh).
"We are extremely pleased that Valley selected SWEPCO to provide VEMCO customers with competitive rates and available long-term generation to meet future electricity needs," said Paul Chodak, SWEPCO president and chief operating officer. "We will now focus on completing the necessary approvals and working soon with our new customers and our new employees on transition and system integration issues moving forward."
"I've been working on this project for months to bring the two companies together for talks, and I'm glad it's moving forward quickly," said Foster Campbell, Louisiana Public Service Commission (LPSC) member from Bossier City. "Valley customers need rate relief, and this opportunity with SWEPCO means Valley customers will pay the same rates that people in Shreveport and Bossier City have paid for years."
"This transaction will bring positive relief regarding rates to Valley Electric customers," said Clyde Holloway, LPSC member from Forest Hill. "At a time of economic hardship, this opportunity with SWEPCO will enable Valley's customers to have lower utility costs."
A toll-free Valley Electric/SWEPCO information line (877-237-6589) has been established to answer questions from VEMCO customers. The information line will be answered between 8 a.m. and 7 p.m. weekdays, beginning November 20.
"We expect that our membership will appreciate the opportunity to vote for the substantial savings in rates offered by SWEPCO and will vote positively on the dissolution when it's presented to them in early 2010," said Tom Epperson, president and CEO of VEMCO.
"This deal meets all the requirements of the VEMCO's Board strategic alliance policy to offer significantly lower rates to our members, preserve VEMCO employee jobs at the same or better wages, and gain more resources for better service," said Johnny Possoit, Valley board chairman.
VEMCO serves 30,000 member customers and 41,000 meters in eight parishes south of Shreveport, including more than 7,000 miles of distribution lines, 90 miles of transmission lines, 29 substations and three service centers.
"Adding Valley's service area will double the size of SWEPCO's geographic footprint in Louisiana and bring economic growth opportunities along the I-49 and Toledo Bend corridors," adds Chodak.
The agreement also calls for the transfer of 101 VEMCO employees to SWEPCO. SWEPCO already is interconnected at transmission voltage with VEMCO. SWEPCO anticipates taking responsibility for providing service to the customers and facilities by mid-year 2010, subject to all regulatory approvals.
The LPSC and the Arkansas Public Service Commission must approve the transaction, as well as the AEP board of directors. Approval by the Public Utilities Commission of Texas (PUCT) is not required, but the PUCT will be notified. Additionally, receipt of required regulatory approvals must come from the Rural Utilities Service and the National Rural Utilities Cooperative Finance Corporation.
SWEPCO serves more than 473,500 customers in three states, including 180,000 in Northwest Louisiana (six parishes), 113,500 in western Arkansas and 180,000 in East and North Texas. SWEPCO's headquarters are in Shreveport, La.
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 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.