US appeals court orders review of AEP, Central & South West merger

By the OGJ Online Staff

HOUSTON, Jan. 18, 2002 — A federal appeals court Friday ordered the US Securities and Exchange Commission to review its approval of the merger between American Electric Power Co. Inc. and Central & South West Corp.

The merger was completed June 15, 2000. The US Court of Appeals for the District of Columbia said the merger violated the 1935 Public Utility Holding Company Act (PUHCA), which requires a US utility’s operations to be interconnected and located in a single area.

The court said the SEC “failed to explain its conclusions” regarding the interconnection requirement. Pat Hemlepp, a spokesman for Columbus, Ohio, based AEP, said the company will work closely with the SEC staff to “determine where there are deficiencies in their records.”

He said AEP is “confident” the courts ultimately will conclude the merger complies with PUHCA requirements.

The SEC approved the AEP and Central & South West merger June 14, 2000. The decision was appealed by the National Rural Electric Cooperative Association and the American Public Power Association (APPA), who argued the approval order departed from SEC precedent without adequate explanation.

They also questioned the companies’ plan to physically interconnect their systems through a 250 Mw transmission contract with Ameren Corp., which expires in 2003. The deal was approved after lengthy and controversial hearings by various state utility regulators, the Justice Department, and the Federal Energy Regulatory Commission.

The APPA said, in a statement, “It is the responsibility of the SEC to enforce the law. PUHCA’s statutory constraints, when enforced, continue to protect the interests of consumers.” While conceding some modernization of PUHCA may be appropriate, APPA added the decision is up to Congress and should be made with “full recognition of the critical importance of electricity in the 21st Century.”

AEP is one of the nation’s largest electric generators with more than 38,000 Mw of capacity, providing power to more than 7 million customers worldwide. The merger combined Central & South West’s operations in Arkansas, Louisiana, Oklahoma, and Texas with AEP’s utilities in Kentucky, Indiana, Michigan, Tennessee, Ohio, West Virginia, and Virginia.

Industry executives said the decision points up the need to repeal the Depression era law. David Sokol, chairman of MidAmerican Energy Holding Co., has testified in Congress that PUHCA is outdated. Friday he renewed a call for Congress to take up the issue.

“In spite of the substantive consensus for repeal, political considerations unrelated to PUHCA have prevented action for years, keeping new investment and greater efficiencies out of the electric system,” he said.

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at

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