BEFORE THE ARKANSAS PUBLIC SERVICE COMMISSION

IN THE MATTER OF SOUTHWESTERN ) ELECTRIC POWER COMPANY’S ) PETITION FOR A DECLARATORY ) ORDER FINDING THAT INSTA LLATION ) DOCKET NO. 12-008-U OF ENVIRONMENTAL CONTROLS AT ) THE FLINT CREEK PO WER PLANT IS ) IN THE PUBLIC INTEREST )

DIRECT TESTIMONY OF CHRISTIAN T. BEAM ON BEHALF OF SOUTHWESTERN ELECTRIC POWER COMPANY

FEBRUARY 8, 2012 APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6TABLE OF CONTENTS

I. INTRODUCTION AND QUALIFICATIONS............................................................... 3 II. PURPOSE OF TESTIMONY ........................................................................................ 4 III. OVERVIEW OF FLINT CREEK POWER PLANT.................................................... 5 IV. ENVIRONMENTAL PROJECTS PROCESS ............................................................. 6 V. TECHNOLOGY SELECTION.................................................................................... 16 VI. FLINT CREEK PLANT PR OJECT COST ESTIMATE ........................................... 25 VII. CONCLUSION ......................................................................................................... 31

EXHIBITS EXHIBIT CTB-1 PROJECT SCHEDULE EXHIBIT CTB-2 TECHNOLOGY OPTIONS

DIRECT TESTIMONY DOCKET NO. 12-008-U Page 2 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6I. INTRODUCTION AND QUALIFICATIONS 1 2 3 4 5

6 7 8 9 10 11

12 13 14 15 16 17 18 19 20 21 Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS. A . My name is Christian T. Beam. My busin ess address is 1 Riverside Plaza, Columbus, Ohio 43215. Q. BY WHOM ARE YOU EMPLOY ED AND IN WHAT CAPACITY? A . My title is Managing Director – Pr ojects and Construction in the Generation Engineering, Projects and Field Services (EP&FS) organization for the American Electric Power Service Corporation (AEP SC). AEPSC supplies engineering, financing, accounting and simila r planning and advisory serv ices to the subsidiaries of American Electric Power Company, Inc. (AEP or “the Company”), including Southwestern Electric Power Company (SWEPCO). Q

. PLEASE DESCRIBE YOUR EDUCAT IONAL AND PROFESSIONAL BACKGROUND

. A . I earned a Bachelor’s Degree in Applied Sc ience with a focus on project management from DeVry University. I am a certified Pr oject Management Prof essional (PMP) and completed the AEP Leadership Program at Th e Ohio State University in 2007. I have held positions of escalating responsibility since I started with Ohio Power Company (a subsidiary of AEP) in 1990 in the Utility Operations department at the Kammer Plant. In 1997, I moved to AEPSC and wa s named Outage Project Supervisor for the Regional Service Organization (RSO) serv ing the Kammer/Mitchell and Cardinal Plants. In 2000, I assumed a new role as Superintendent for the RSO supporting

DIRECT TESTIMONY DOCKET NO. 12-008-U Page 3 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6

7 8 9 10 11

12 13 14 15 16 Southwestern Electric Power Company (anot her AEP subsidiary) and subsequently became Manager - Region Outage Manage ment in 2002. In 2004, I was named Manager for the Flue Gas Desulphurizat ion (FGD) retrofit project at APCo’s Mountaineer Plant. I became Manager - Construction Technology in 2007 and then Director - Construction in 2008. In 2009, I was named the Project Director – Environmental Retrofit Projects. I assumed my current position in 2010. Q

. WHAT ARE YOUR PRIMARY RESPON SIBILITIES IN YOUR CURRENT POSITION? A . As Managing Director - Projects and Construction, I am responsible for the construction and start-up services associat ed with all environmental retrofit and new generation projects and the project ma nagement of AEP’s western fleet. Q

. HAVE YOU PREVIOUSLY FILED TESTIMONY AS A WITNESS BEFORE ANY REGULATORY COMMISSION? A . Yes, before the Public Service Commission of West Virginia in 11-0274-E-GI, the Commonwealth of Virginia State Cor poration Commission in PUE-2011-00036, and the Public Utility Commission of Texas Docket No. 39708. II. PURPOSE OF TESTIMONY 17 18 19 20 21 Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY IN THIS PROCEEDING? A . The purpose of my testimony in this proceed ing is to provide a brief overview of the Flint Creek Power Plant and to describe th e process that is being performed by the AEPSC, on the behalf of SWEPCO, to retr ofit Flint Creek with environmental

Page 4 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 7 8 9 10

11 12 13 equipment including the proposed flue gas desu lfurization (FGD) with pulse jet fabric filter (FF), also referred to as a baghouse, to reduce the plant’s emissions of sulfur dioxide (SO 2 ) and activated carbon injection (ACI) to reduce the plant’s emissions of mercury (Hg). I will also describe AEPSC’s efforts to select the best SO 2 and hazardous air pollutants (HAPS) reduction t echnology for Flint Creek, the expected performance of the technology, and the current cost estimate to re trofit the technology on the unit. SWEPCO also anticipates a need for low NO X burners and over-fired air for environmental compliance. Finally, I will provide information on the current status of the project and the project plan, including the crit ical milestones to meet the environmental regulatory compliance deadlines. Q. ARE YOU SPONSORING ANY EXHI BITS IN THIS PROCEEDING? A . Yes, I am sponsoring Exhibit CTB- 1 – Project Schedule and CTB-2-FGD Technology Options. III. OVERVIEW OF FLIN T CREEK POWER PLANT 14 15 16 17 18 19 20 21 Q. PLEASE DESCRIBE THE FL INT CREEK POWER PLANT. A . The Flint Creek Power Plant is a join tly-owned plant located in Benton County, Arkansas near the town of Gentry. Ar kansas Electric Cooperative Corporation (AECC) is the co-owner of the plant on a 50/ 50 net output and cost basis. Flint Creek is a single-unit, pulverized coal-fired plant with a ne t capacity of 528 MW and was placed in service in 1978. SWEPCO’s owners hip portion of this unit is 264 MW net, and is responsible for operating and maintaining the plant.

Page 5 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 The Flint Creek unit is fueled with low sulfur Powder River Basin (PRB) coal received via unit coal trains . Fuel oil is used for ignition and flame stabilization on this base-load unit. The unit is currently equipped with electrostatic precipitators for fly ash control. Fly ash collected from th e electrostatic precipitators is sold for byproduct re-use as part of the company’s sust ainability program. Ash not sold for reuse is currently transported via truck to an on-site permit-approved landfill. IV. ENVIRONMENTAL PROJECTS PROCESS 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Q. PLEASE DESCRIBE THE PLANNIN G ACTIVITIES CONDUCTED BY THE COMPANY FOR THE RETROFIT OF ENVIRONMENTAL CONTROLS AT FLINT CREEK

. A . As addressed by Company witness Weaver , the Company has acted to identify the most economical SO 2 , mercury and other HAPS reduc tion technology, and has also developed an associated cost estimate in orde r to perform analyses to determine if the project is economically benefi cial for SWEPCO customers. Q. PLEASE PROVIDE AN OVERVIEW OF THE CURRENT PROJECT PLAN FOR THE FLINT CREEK FGD. A . The Flint Creek Plant’s FGD retrofit proj ect will be executed using the same phased approach that has been successfully empl oyed by AEP on many past projects. The phased approach begins with Phase I, which consists primarily of a feasibility study. Phase IIa is the preliminary engineering and design stage, while Phase IIb provides for detailed engineering, de sign, and initial site construc tion activities. Full-scale

Page 6 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 construction, startup, and commissioning ar e undertaken in Phase III. A detailed evaluation, followed by financial authoriza tion, is required before the project can proceed from one phase to the next. A graphical timeline showing the phased approach as well as major project mile stones is provided in Exhibit CTB-1. Since 2004, AEP has implemented this pha sed approach in the installation of FGD systems on nearly 10,800 MW of coal-fir ed generation and se lective catalytic reduction (SCR) systems on more than 8,200 MW. At the height of construction activity in 2007, Engineeri ng News-Record identified AEP’s overall construction program as the largest in the utility industry and the second largest in the nation, based on capital invested. The Flint Creek Plant FGD retrofit will positively benefit from years of valuable lessons learned a nd best practices. AEP’s Quality Assurance Program for Projects is based on industry standard methodology established by the Project Management Institute (PMI). In addition, AEP’s Project Management leadership team for the Flint Creek Plan t FGD Project is PMI Project Management Professional (PMP) certified. Q. IN WHAT PHASE IS THE FL INT CREEK PLANT’ S FGD PROJECT CURRENTLY? A . The project is currently in Phase I. Th e project has been initiated and the project planning and conceptual engineering requi red to support this filing have been completed. A Project Plan will be developed which will include a detailed execution strategy for the engineering, design, proc urement, permitting, construction, startup and commissioning of the FGD and ACI systems.

Page 7 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Q. PLEASE DESCRIBE THE ACTIVITIES THAT OCCUR DURING PHASE I. A . The formal process begins with the preparation and approval of a Capital Improvement Requisition (CI) after which an architect/engineer is engaged to perform the engineering, design, and feasib ility studies for Phase I and the ensuing phases of the project. The intent of the Phas e I feasibility studies is to investigate the technical options and factors driving the project cost and schedule. During Phase I, the architect/engineer, with input from a team of AEPSC engineers and managers, defines the scope of the project, prepares work plans, and develops a budgetary cost estimate and schedule for implementation. In addition, preliminary environmental permitting activities begin and the FGD and ACI supplier is released to begin conceptual engineering. The results of the Phase I conceptual engineering and feasibility studies are presen ted to senior management a nd authorization is sought to proceed to Phase IIa. Appr oval to proceed to the next project phase is accomplished by either a formal AEPSC and SWEPCO Management meeting or the CI revision approval by the key stakeholders. Q. PLEASE DESCRIBE THE ACTIVITI ES THAT TAKE PLACE IN PHASE IIA. A . Phase IIa consists of preliminary e ngineering, design, permitting and procurement work. During this phase, we finalize the pr oject scope, refine the cost estimate and schedule, award the Original Equipment Ma nufacturer (OEM) contract, procure long lead time equipment, and develop drawings to the point that detailed design work can begin. During Phase IIa, modifications to ex isting air, water and waste environmental

Page 8 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 permits are submitted to the Arkansas Department of Environmental Quality to begin the evaluation and approval process, and we assemble the construction and site management teams to begin design evaluations to ensure that the proposed scope of work is optimized for constructability. We also define site preparation plans, determine which, if any, facilities will need to be relocated, select a site preparation contractor, and complete studies to suppor t the various permitting activities that will be required. Upon completion of Phase IIa , the project is again evaluated by key stakeholders to proceed to the next project ph ase. In this case, a Phase IIb CI revision will be prepared for approval by AEPSC and SWEPCO Management. Q. PLEASE DESCRIBE PHASE IIB OF THE PROJECT PROCESS. A . Phase IIb consists of detailed engineer ing, design, contractin g and initial site construction work that can be performed prio r to the final approval of the air permit. During this phase, as detailed design progr esses, construction bid packages are prepared and major equipment is specifie d, bid, and purchased. The construction and site management teams are mobilized and begin site construction work, and we proceed through the process of selecti ng and awarding the major construction contracts. Upon completion of Phase IIb, the project is evaluated once again, and a Phase III CI revision will be prepar ed for approval by AEPSC and SWEPCO Management.

Page 9 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Q. WHAT TAKES PLACE DURING PHASE III? A . Phase III consists of the full-scale cons truction and startup and commissioning of the project. The principal construction c ontractors mobilize and begin the major construction effort. Engin eering and design continues in support of the project throughout the construction and testing activ ities, including th e validation of the design, the preparation of as-built drawings, and the evaluation and approval of necessary design changes. Phas e III is complete when the project is complete and the equipment is commissioned and placed in service. Q. WHAT ARE THE MAJOR BENEFIT S DERIVED FROM THIS PHASED APPROACH TO CONSTRUCTION PROJECTS? A . The phased approach provides structured cont rol of the project scope and costs. It provides a minimum of three specific decision points (the end of Phases I, IIa, and IIb) where engineering and design, cost, and sc hedule are evaluated to ensure they are meeting the intent and expectations of the project. Starting major construction activities when the detailed discipline design is substantially complete allows construction to proceed, in many cases, on a fi xed or target price basis, since many of the design changes that might otherwise resu lt in additional work and cost will have been identified and remedied. Particip ation by experienced construction team members during the design phases assu res that the equipment layout and modularization results in optimized construc tability and a smooth transition into the major construction phase of the project.

Page 10 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Q. PLEASE GENERALLY DESCRIBE THE PROCESS FOR SELECTING A SPECIFIC TECHNOLOGY AND OEM VENDOR FOR THE ENVIRONMENTAL CONT ROLS TO BE INSTALLED AT ANY UNIT. A. AEP maintains an updated lis t of technologies that have been proven effective in removing emissions from power plant efflue nt streams. When a generic control technology (e.g., wet or dry scr ubber) has been identified as a potential environmental compliance solution for a specific unit burni ng an identified range of fuel, an Evaluation Team determines, on a unit-speci fic basis, which OEMs provide control technologies that can be used on that unit. The Evaluation Team then determines the Total Evaluated Cost (TEC) over the life of the project for each technology. If there is no significant difference between or among the TECs or analyzed business risk, the OEM technology that presents the lowest To tal Installed Cost (TIC) is preferred. Q. PLEASE GENERALLY DESCRIBE THE PROCESS USED TO SELECT A CONSTRUCTION CONTRACTOR FOR THE ENVIRONMENTAL CONTROLS AT ANY UNIT. A . AEP has processes for evaluating and qualif ying construction cont ractors to ensure they have the capability to perform work of the type and scope envisioned with a demonstrated record of safety focus and performance. Proposals are requested from two or more of the contractors on that list. The final award is based on the TEC and safety performance of those bidders, along w ith ancillary considerations such as a financial risk assessment, any pricing discounts offered for multiple-unit awards, negotiated shared risk/reward programs, and similar factors.

Page 11 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6

7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Q. WHAT STEPS DOES AEP TAKE TO ENSURE THAT PROJECT COSTS ARE REASONABLE AND NECESSARY? A . The three-phase process enables periodi c and structured technical and cost evaluations throughout each phase. The Ph ase I feasibility st udy assesses technical options and costs. Phase IIa and IIb engi neering produces preliminary, then detailed designs to refine the associated costs. As previously discussed, contracti ng for construction activities when the detailed discipline design is substantially complete allows constr uction to proceed, in many cases, on a fixed or target price basis. This serves to mitigate SWEPCO’s and our customers’ exposure to upside cost risk s. As Phase III co nstruction and startup and commissioning proceeds, we use prudent construction management practices and cost and schedule controls to ensure that the projects are accomplished in a safe, as well as professional, and cost-effective manne r. To that end, AEP has developed a robust Quality Assurance/Quality Control manual that includes Standard Operating Procedures for such activities as Pr oject Integration and Planning, Work Management, Preparation of Estimates, Pr ocurement, Project Schedule Control, Project Cost Control, Corre ctive and Preventive Actions , and, above all, Safety. Q. PLEASE DESCRIBE AEP’S PR OJECT MANAGEMENT PROCESS. A . AEP uses several formalized management and control processes developed during our years of project execu tion experience to ensure pr ojects meet cost, schedule, quality, and safety requirements.

Page 12 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Project Cost Management involves the planning, estimating, forecasting, and controlling processes used during each phase of project execution. Estimates and budgets are revised as the project progresse s through its phases, and metrics are used to report and manage against those budgets. The cost projections are refined as more engineering is completed, detailed scope is finalized, and estimates are updated with quotes for supply. A detailed risk assessment is completed and revised to determine the level of contingency required by the ri sks identified as the project progresses. Project Schedule Management ensures that the overall project is executed in accordance with the needs of the interfacing groups so that work is completed in support of the initial opera tion date. This is acco mplished through the use of scheduling tools, the establishment and mon itoring of critical project milestones, and the monitoring of specific performance and production metrics. The development of an integrated schedule involves the applic ation of sequencing and durations for the activities required to complete the project. AEPSC acts as the project integrator and the architecture/engineer (A/E), contr actors, and vendors provide comprehensive monthly status reports on the project sc hedule as well as weekly comprehensive schedule updates that include informati on on activity progress, 30-day look-ahead reports, the status of major activities, and cost/schedule integration information. Project Quality Management ensures th at the installed project meets all AEPSC requirements for form, fit, functi on, and performance. AEPSC Engineering develops a detailed scope of work (SOW) which includes design criteria and specifications for the FGD equipment. A Quality Oversight Plan (QOP) will be

Page 13 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6

7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 developed to determine what inspections will be conducted, their frequency and the responsible person(s). As pa rt of this plan, an engi neering evaluation plan is developed and executed to ensure the quality of the A/E’s engineering deliverables. The AEPSC construction site manager will assure field inspections are performed both independently and concurrently with any contractor’s inspections. All assessments will be documented to ensure compliance with the QOP. Project Safety Management processes ar e used by AEPSC to ensure that the project is completed in the safest manner possible. AEPSC has a corporate goal of “Target Zero”, which means zero harm to all employees and contractors. The Company has an established culture of pr oviding the safest possible workplace. Every person in an AEPSC facility or on an AEPSC project needs to be proactive in working towards the Company’s “Target Zero” goal. A cornerstone in achieving this goal is planning safety into the work. A sa fe project involves “planning the work and then working the plan.” Q. PLEASE DESCRIBE OTHER FORMALIZED MANAGEMENT AND CONTROL PROCESSES USED BY AEP. A . The Company also formally manages and c ontrols procurement, contracts, and risk activities. Project Procurement/Contract Management utilizes competitive bid and program purchase processes to ensure low costs from contractors and vendors that meet AEPSC performance and technical specifications.

Page 14 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6

7 8 9 10 11 12 13 14 15 16 17 18 19 Project Risk Management involves the formal process of identifying, quantifying, and mitigating risks associated w ith the project. This is done through the development of a detailed risk register so that risk can be prioritized and resources efficiently focused on mitigating the most cri tical risks. The risk register is updated periodically throughout the project duration to ensure risk mitigation priorities are valid. Q. WILL THE PHASE I FEASIBILITY STUDIES COVER THE ENTIRE SCOPE OF THE FLINT CREEK FGD PROJECT? A . Yes. AEP will establish a Division of Work (DOW) clearly defining the responsibilities of the assigned parties not only for the FGD technology, but also site development, reagent and material unlo ading and handling systems, any required switchyard modifications and the identifica tion of all permitting requirements. AEP design criteria will be clear ly communicated to the A/E and the OEM to ensure the benefits of our knowledge and experien ce in owning, maintaining and operating similar systems is carried forward on the Flint Creek Plant project. Q. CAN YOU PROVIDE A GRAPHI CAL SUMMARY OF THE PHASED APPROACH TO CONSTRUCTION? A . Yes. Exhibit CTB-1 shows a preliminary project schedule for th e various activities that will take place during this phased approach to construction.

Page 15 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 7 8 9 10 Q. WHEN IS EACH PHASE ESTIMATED TO BEGIN? A . Each phase and subsequent activities ar e displayed in Exhibit CTB-1. Phase I has already commenced and activities are expected to be completed in the third quarter of 2012 with Phase IIa to start in the same time frame. Phase IIb is estimated to begin in the first quarter of 2013 and be completed by th e end of the fourth quarter of the same year. We are currently planning on commen cing Phase III site construction activities on approximately January 1, 2014, predicated upon the receipt of the Permit-to-Install (PTI), often referred to as the air perm it, from the Arkansas Department of Environmental Quality (ADEQ) . Any delays to the issuance of the air permit may result in schedule delays and cost impacts to the overall execution of the project.

V. TECHNOLOGY SELECTION 11 12 13 14 15 16 17 18 19 20 21 Q. WHAT FGD SYSTEMS WERE CONS IDERED AND HOW DO THEY WORK TO REDUCE SO 2 EMISSIONS? A . A variety of SO 2 control processes and technologies are in use within the industry, but two commercialized processes emerged for comparative study on Flint Creek: Limestone Forced Oxidation (LSFO) Sp ray Tower Wet FGD and Lime Dry FGD with Recycle. These proce sses are typically referred to in the industry as wet FGD (WFGD) and dry FGD (DFGD) systems, respectively. In a WFGD system, alkaline reagent slurry (usually lime or limestone) is injected into a vessel, where it react s with the flue gas to collect the SO 2 . A WFGD absorber utilizes a high volume of liquid slurry continuously circulating in the

Page 16 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 absorber vessel and collecting in the absorber reaction tank where the scrubbing reaction occurs. A DFGD is comprised of th e absorber vessel or duct integrated with a FF. The DFGD does not utilize a liquid filled reaction tank, but instead relies on the scrubbing reactions to take place as the flue gas intermingles with the lime inside the vessel or ductwork and al so in the highly reactive dust cake on the surface of the downstream fabric filter media. Q. WHAT ARE THE KEY OPERATIO NAL DIFFERENCES BETWEEN A WET FGD AND A DRY FGD SYSTEM? A . In most WFGD systems, limestone slurry is used as the reagent and a gypsum byproduct is formed as a result of the chem ical reaction. In DFGD systems, lime is used as the reagent and calcium sulfite is fo rmed as a result of the chemical reaction. The WFGD process requires an add itional step not required of a DFGD. A WFGD requires dewatering of the reactio n byproducts for solid s handling, landfill suitability, and water reus e or disposal; a DFGD colle cts the reaction byproducts directly in a downstream fabric filter. Thus, solids dewatering or wastewater treatment is not required for a DFGD system. On a comparable inlet SO 2 concentration, water cons umption, auxiliary power usage, solid waste disposal, and equipment footprint are higher for a WFGD than for a DFGD. Co-benefit emissions contro l for mercury and other Hazardous Air Pollutants (HAPs) is better with a DFGD versus a WFGD due to the integral fabric filter (FF) baghouse associated with the DF GD technology. This is due to the dual functionality of the FF to both remove particulate ma tter and provide additional

Page 17 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 contact time between flue gas and reagent to further reduce SO2 emissions. Plants with WFGD operate with a “wet stack” or a visible thick water vapor plume exiting the stack under all ambient c onditions. The stack plume from a DFGD is typically not visible because it operates above the flue gas saturation temperature. A slight water vapor plume might become visible under certain ambient conditions of temperature and humidity. Q. DID THE COMPANY CONDUCT A ST UDY TO COMPARE THE USE OF A WFGD TO A DFGD FOR FLINT CREEK? A . Yes. The Projects and Constructi on group provided tec hnology performance parameters and cost estimates for the in itial high level overview of reasonable SO 2 compliance options available to SWEPCO customers. Technical and economic evaluations were performed to comp are and contrast the WFGD and DFGD technology options that may be applied wh ile burning 0.8 lb sulfur/mmBTU coal. The evaluation of the FGD technology op tions considered environmental and technical performance, retrofit constraints, and collateral environmental and technical impacts associated with the evaluated te chnologies. An economic analysis was performed, as outlined in Company witness Scott C. Weaver’s testimony. An OEM proprietary DFGD system was compared to a Spray Dryer Absorber (SDA) technology, Circulating Dry Fluidi zed Bed Scrubber (CDS) technology, and the Limestone Forced Oxidized (LSFO) Spray Tower WFGD technology.

Page 18 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Q. WHAT ARE THE COST COMPARI SONS BETWEEN A DFGD AND A WFGD? A . A detailed cost estimate for a DFGD has not been completed for Flint Creek since engineering and design is only in the very early phases. However, our initial Flint Creek Plant cost comparison supports the industry expectation that DFGD is less capital intensive than WFGD. DFGD uses le ss exotic materials of construction than a WFGD, which not only reduces the initial capit al costs, but also future maintenance and equipment replacement costs. In a ddition, fixed and vari able O&M costs are very different, primarily driven by the costs of the reagent used (lime versus limestone). The fuel sulfur content will influence the reagent consumption and thus the variable cost of either technology. Q. PLEASE OFFER AN OVERVI EW OF THE FGD RETROFIT ALTERNATIVES CONSIDERED FOR FLINT CREEK? A. The Company, as well as an AEP EP& FS and AEP Fuel, Emissions & Logistics (FEL) cross-functional team, initially identified and economically-screened a combination of five (5) FGD technology options that were acceptable emission removal solutions for Flint Creek. Exhib it CTB-2 lists those options; however, they can generally be broken down into: 1) two va riations of a “wet” FGD; 2) three forms of “dry” FGD technology; 3) a traditional sorbent-injection (SDA) dry FGD; 4) a circulating dry scrubber (CDS) technology; and 5) an OEM proprietary modular DFGD technology (“NIDTM” design). For al l options, this technology screening assumed the utilization of a 0.8 lb. per MMBtu sulfur-content, Power River Basin

Page 19 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 (PRB) coal source. Finally, the cross-f unctional team also offered two additional “time-sensitive” cost views pertaining to the NIDTM DFGD option. In addition to the “base” 30-month construction period, this technology screening team assessed costs applicable to both a 24-month and a 27- month accelerated construction window. Based on the alternativ e economic screening performed, as summarized in Exhibit CTB-2, it was recommended by the team that the optimum FGD “retrofit” alternative to be utilized for furthe r modeling purposes was the modular NIDTM DFGD technology solution. The model uti lized a 0.8 lb. per MMBtu sulfur-content coal, and employed a 30-month construction period. Q. IS ONE OF THE FGD TECHNOLOGI ES A CLEAR FRONT RUNNER TO BE SELECTED FOR INSTALLATION AT FLINT CREEK PLANT? A . Yes. Considering equivalent SO 2 removal efficiencies among the evaluated FGD technology options for the aforementione d design basis, the proprietary DFGD technology is the favored FGD t echnology based on the following:

 Lowest total evaluated cost on 30-year (2011-2040) cumulative present worth basis (capital and O&M).

 Lowest water consumption - Total water consumption for the DFGD is significantly less than for the WFGD. This is a major consideration given that Flint Creek is considered to be water lim ited, as the plant is projected to have difficulty maintaining lake level during a repeat of the historical worst three years of runoff even without the addition of a FGD system. Lowest auxiliary power usage - Auxiliary pow er requirements are significantly less for a DFGD

Page 20 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 than for a WFGD.

 Lowest reagent usage - Reagent usage is significantly less for a DFGD than for a WFGD.

 Smallest equipment footprint

 Best supports ACI for mercury remova l and other hazardous air pollutants (HAPS) removal – Based upon MATS HAPS limits, in particular for mercury, a DFGD is better suited to an ACI system retrofit because the DFGD already includes a fabric filter. A WFGD inst allation would require the addition of spray towers and an upstream fabric filter or a wet electrostatic precipitator, along with the installation of an ACI system for me rcury control to achieve the levels of mercury reductions possible with a DFGD and ACI.

 Best supports SO 3 removal - A DFGD does not create a visible moisture plume leaving the stack under most conditions, while a WFGD does.

 Best supports future National Polluta nt Discharge Elimination System (NPDES) permit compliance Q. WAS A SPECIFIC DFGD TECHNOLOGY SELECTED FOR THE INSTALLATION AT FLINT CREEK? A . Yes. As shown in Exhibit CTB-2, the t echnical and economic evaluation of the FGD technologies shows that the proprietary NID TM DFGD technology is the preferred technology for Flint Creek. While the NID TM technology has all of the benefits of the typical DFGD technologies discussed previous ly, it also has signi ficant benefits over other DFGD technologies, including the previous SDA technology that was proposed

Page 21 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 for the Flint Creek Plant prior to the suspension of the project. The total installed capital costs for NID TM are lower than that for other DFGD technologies. O&M costs are also lower for NID TM , as the total amount of lime consumption required for similar SO 2 removal is less than the amount for other DFGD technologies. Unlike ot her DFGD systems, the NID TM technology process does not require the use of lime slurry and its associated equipment. This results in a less complex system that is easier to install and maintain. NID TM technology can attain higher levels of SO 2 reduction, with vendor guarantee removal rates of 98% compared to maximum removal rates of 95% for SDA and other DFGD technologies. The higher removal rate for NID TM allows for greater fuel flexibility for the Flint Creek site to meet environmental compliance limits. . The DFGD system that is proposed fo r installation at Flint Creek will remove 95% of the SO2 in the flue gas to meet an ticipated emission limits for the design basis fuel. However, as discussed above, NID TM technology provides greater flexibility for increased SO 2 removal rates, if required in the future. Q. PLEASE PROVIDE AN OVERVIEW OF THE EQUIPMENT THAT WILL BE INSTALLED AS PART OF THE DFGD SYSTEM. A . The following equipment would be installed as part of a DFGD system installation at Flint Creek. This list is not all-inclusive.

 Pebble lime rail and truck unloa ding equipment and storage silos

 Absorber vessels or ductwork modules

Page 22 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 7 8 9 10 11

12 13 14 15 16 17 18 19 20 21  Induced draft fans and motors

 Tie-in ductwork

 Pulse jet fabric filter

 Ash recycle system foundations, equipment, and building

 Waste storage silo and truck loading equipment

 Equipment to supply electrical needs of new process equipment

 Distributed control system (D CS) for new process equipment

 Balance of plant piping (fire protec tion, service water, sanitary, etc.) Q. WHAT IS THE PROJECTED SERVICE LIFE OF THE DFGD SYSTEM? A . The DFGD system has been specified such that the system shall operate safely, reliably and without excessive mainte nance for a design life of 25 years. Q. PLEASE SUMMARISE WHY A DFGD WAS CHOSEN FOR INSTALLATION AT FLINT CREEK? A . Based on the above, the DFGD is the technol ogy of choice for Flint Creek to meet the required emission limits. The DFGD projec t cost estimate will be refined as engineering and design progres ses, but DFGD is projected to be the lowest cost option especially when considering multi-pollutant reduction performance compared to WFGD. While both systems would meet the necessary emi ssion limits imposed by the Arkansas Regional Haze Rule (RHR), Cr oss- State Air Pollution Rule (CSAPR), and the Mercury Air and Toxic Standards (M ATS Rule), the DFGD system is better suited for Flint Creek from both a technical and cost perspective.

Page 23 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Q. HAS AN ACI SYSTEM BEEN INCL UDED AS PART OF THE EVALUATION OF THE FGD FOR FLINT CREEK? A . Yes. In order to meet the mercury rem oval requirements of the MATS Rule, an ACI system will be required for the Flint Creek Plant. Typically, an ACI system requires the installation of a FF to collect the activ ated carbon/mercury particulate. Since an FF is an integral component of the DGFD scope, it has been included in the economic and technical evaluation for the Flint Creek Plant environmental projects. Q. WHAT OTHER ENVIRONMENTAL PROJECTS WILL BE INCLUDED? A . Low NO X burners and over-fire air may need to be installed at Flint Creek. Low NO X burners are designed to burn coal at the lowest reasona ble temperature while also starting stable combustion as soon as possibl e. Over-fire air is commonly used in conjunction with low NO X burners to further reduce of the amount of oxygen available for combustion in the main burner zone. If low NO X burners and over-fire air are installed on Flint Creek, the NO X rate is expected to drop to the 0.18 to 0.22 lbs/mmbtu range. In addition, a landfill is planned for construction in support of the DFGD system installation, and will be used for the disposal of coal combustion byproducts that are not suitable for comme rcial or public use. Other systems and equipment to be installed in support of the functionality of the DFGD sy stem for Flint Creek include balanced draft conversion; material hand ling improvements, steam coil modifications;

Page 24 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5

6 7 8 9 10 11 12 13 unit controls modernization for new pro cess equipment; and continuous emissions monitors (CEMS) upgrades. Q. IS AN SCR INCLUDED IN TH E FLINT CREEK ENVIRONMENTAL PROJECTS FOR MATS RULE, CSAPR AND/OR ARKANSAS RHR COMPLIANCE? A . No. An SCR is not required for the cu rrent compliance strategy for the Flint Creek Plant environmental projects. Howeve r, as discussed by Company witness Hendricks, there is a potential for the additi on of an SCR at the Flint Creek Plant in the future. As part of the planning for th e DFGD system, the potential addition of an SCR at a later date will be included. The possible SCR installation will result in the need to reserve areas on the DFGD equipm ent General Arrangement (GA) drawings for the installation of an SCR system, and the sizing of new fans to accommodate the potential installation of an SCR in the future. VI. FLINT CREEK PLANT PROJECT COST ESTIMATE 14 15 16 17 18 19 20 Q. WHAT IS THE ESTIMATED PROJECT COST FOR THE INSTALLATION OF THE DFGD SYSTEM AND OTHE R ASSOCIATED ENVIRONMENTAL CONTROLS ON THE UNIT AT THE FLINT CREEK PLANT? A . SWEPCO’s cost of the DFGD system and associated environmental controls project installations, excluding AFUD C and company overheads, is currently estimated at $408.7 million, as shown in Table 1 below.

Page 25 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6Table 1 Flint Creek Plant Environmental Controls Capital Cost Summary

Scope of Work Direct Cost ($M) FGD DFGD $312.2 ACI $14.3 Associated Projects Landfill $25.0 Unit Controls Modernization $20.0 Low Nox (LNB, OFA) $16.0 Balanced Draft

Modifications $15.0 Material Handling Improvements $3.5 CEMS Systems $2.2 Steam Coil Mods $0.5 Total $408.7 1 2 3 4 5 6 7 8 9 10 This cost estimate includes the installa tion of the DFGD system, landfill development work that is necessary to dispose of the product from the DFGD, and other associated upgrades to existing plant eq uipment, including unit co ntrols modernization, low NO X burners and OFA upgrades, balanced dr aft modifications, material handling improvements, steam coil upgrades, c ontinuous emission monitoring systems (CEMS) and ACI. This estimate also includ es an allocation for support of the project from the AEPSC (Owner’s Cost). Q. HOW WAS THE COST ESTIMATE FOR THE FLINT CREEK PROJECT DEVELOPED? A . The estimate was developed from technology evaluations and estimates associated

DIRECT TESTIMONY DOCKET NO. 12-008-U Page 26 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 with FGD studies for AEP’s Big Sandy a nd Rockport Plants and AEP’s years of experience with environmental system construction and startup execution. Competitive bids were solicited for various removal technologies as part of these studies; however, the pricing was based on highly indicative supplier estimates with little to no site specific detail. The sele cted bid proposal estima tes were converted to $/kw indicative pricing to al low for scaling of pricing associated with Flint Creek’s 528 MW unit size. The estimates were based on an assumed in-service date occurring during the second quarter of 2016. Q. WHAT IS THE LEVEL OF ACC URACY CONTAINED IN THE COST ESTIMATE PRESENTED IN THIS TESTIMONY? A . The cost estimate presented in my dire ct testimony is based on recognized standards by the Association for the Advancement of Cost Engineering (AACE). Based upon our experience in executing projects such as this and our utilization of actual cost data from recent projects, as outlined above, we believe our range of accuracy to be in -15% to +20% range. We w ould be somewhat remiss to pr esume that all site-specific anomalies have been both recognized and accounted for in our estimate methodology and thus have chosen to apply a 10% contingency to our estimate. Q. WHAT OTHER ACTIVITIES MU ST BE COMPLETED PRIOR TO THE DEVELOPMENT OF A MORE D ETAILED COST ESTIMATE? A . As outlined above, the project is currently in Phase I engineering and design. Further project planning and conceptu al engineering will be performed and the cost estimate will be refined before proceeding to Phase IIa in the fourth quarter of 2012. During

Page 27 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Phase IIa, the cost estimate will be further refined. This work is currently scheduled to be completed in the first quarter of 2013 before the project can enter Phase IIb. Phase IIb will continue through the fourth quarter of 2013 and will result in a highly detailed cost estimate. Q. PLEASE DESCRIBE HOW SWEP CO HAS ACCOUNTED FOR THE ESCALATION OF LABOR AND MATERIALS IN THE COST ESTIMATE. A . SWEPCO has included the escalation of labor and materials in the cost estimate. The estimate takes into consideration AEP’s pa st experience in procuring labor and materials, and the actual annual escalation/de-escal ation rates to date. Q. DOES SWEPCO EMPLOY ANY M ETHODS TO MITIGATE THE RISK OF ESCALATION OF COSTS THAT MAY AFFECT THE CONSTRUCTION OF THE FLINT CREEK PLANT DFGD? A . Yes. SWEPCO and its customers will be benefitted by having access to AEPSC’s Business Intelligence group. One of the key functions of this group is to analyze past, current and projected future market c onditions and recommend alternatives to minimize the risks of volatility present in labor, equipment and material markets. AEPSC’s strategy of being first to market, locking in queues in production facilities, entering into procurement arrangements su ch as Discount Cooperative Agreements with major equipment vendors and procurin g materials and commodities in bulk at competitive prices serves to mitigate the risk of market price spikes. This strategy will benefit SWEPCO’S customers as many ot hers in the industry will be undertaking similar large-scale construction projects to comply with the environmental

Page 28 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 regulations. Q. IS IT YOUR PROFESSIONAL OP INION THAT SWEPCO/AEPSC HAS DEVELOPED A REASONABLE COST ESTIMATE FOR CONSTRUCTION OF THE PROJECT? A . Yes. The cost estimate for the Flint Creek Plant project is reasonable considering the development basis and the degree of s ite-specific engineering and design work completed to date. Q. HAVE SIMILAR DFGD PROJECTS BEEN SUCCESSFULLY INSTALLED AT OTHER AEP UNITS COMPARABLE TO THE FLINT CREEK PLANT? A . AEP is currently installing a DFGD system at the John W. Turk plant in Fulton, Arkansas. The Company has also applied fo r the grant of a Certificate of Public Convenience and Necessity (CPCN) from the Indiana Utility Regulatory Commission (IURC) and the Kentucky Public Service Co mmission (KPSC) for the installation of DFGD technology at both the Rockport a nd Big Sandy Plants. DFGD is a proven and viable technology for SO 2 reduction for coal-fired power plants. AEP has a proven track record of successfu lly managing the design and construction of many major environmental projects and it is expected that the DFGD installation at Flint Creek will be another success. Q. HAS AEPSC, ON BEHALF OF SWEPCO, CONDUCTED PAST WORK ASSOCIATED WITH A FGD RETROFIT FOR THE FLINT CREEK PLANT? A . Yes. As a part of the Clean Air Interstate Rule (CAIR) compliance strategy, AEPSC began preliminary Phase I feasibility analyses on the Flint Creek Plant in the first

Page 29 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 quarter of 2009. Our Engineering, Procurem ent, and Construction (EPC) Contractor, Western Clean Coal Partners (WCCP), a joint venture of The Industrial Company (TIC) and Sargent & Lundy (S &L), completed a 90% conf idence level, order of magnitude cost estimate for DFGD. AEPSC also completed an order of magnitude cost estimate for a WFGD system based on its installation of WFGD technology in prior years on its eastern fleet of coal-fired power plants. Q. WHAT FACTORS SUPPORTED THE DECISION TO END PHASE I WORK ASSOCIATED WITH THE FL INT CREEK PLANT DFGD? A . As discussed by Company witness Hendricks , a decision was made by the Arkansas Pollution Control and Ecology Commission to stay Arkansas State Implementation Plan (SIP) requirements. As a result, SWEPCO decided to suspend activities surrounding the installation of the DFGD until better clarity was available in regards to the SIP requirements. Q. WHAT WAS THE COST OF THE FLINT CREEK PLANT WORK PRIOR TO THE SUSPENSION? A . Prior to the suspension of Phase I and some Phase II activities, approximately $7.1 M of cost associated the DFGD project was incurred as of December 31, 2009. Q. IN VIEW OF THE SUSPENSION OF THE FLINT CREEK PLANT ACTIVITIES, DO YOU CONSIDER THESE COSTS TO HAVE BEEN PRUDENTLY INCURRED? A . Yes. The costs incurred represent the best efforts at that time to address the necessary part of the development of the Flint Creek DFGD that is required to meet the federal

Page 30 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U 1 2 3 4 5 6 7 8 9 10 11 and state emission standards described in the testimony of Mr. He ndricks. Also, the performance of this work generated the ne cessary information that the project would be more complex and expensive than originally anticipated and led to the conclusion that suspending the project was what provi ded the most benefit to SWEPCO and our customers until a period that would be economically feasible , and provide better clarity of regulatory requirements. Since th e suspension of the or iginal project, an additional commercially prove n removal technology has beco me available for use at the Flint Creek Plant. This new t echnology is the NID DFGD process and, as previously discussed in my testimony, repr esents a more cost effective and suitable means to comply with final and proposed EPA regulations which create additional benefit for SWEPCO’s customers. VII. CONCLUSION 12 13 14 15 16 17 18 19 20 21 22 Q. PLEASE SUMMARIZE THE NE ED FOR THE FLINT CREEK ENVIRONMENTAL RETROFIT PROJECT. A . The installation of environmental contro ls at the Flint Creek will help meet compliance requirements for the final and proposed environmental regulations to insure continued operation of this unit as a reliable, cost-effective source of generation for SWEPCO’s customers. AEP’s phased strategy for the design, engineering, procurement, construc tion, and startup/commissioning of its environmental compliance projects contribute s to a more reliable, safe, timely, and cost effective project at completion. AE P continues to use and improve prudent project management practices and quality control procedures. These practices and

Page 31 of 32 CHRISTIAN T. BEAM APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6DIRECT TESTIMONY DOCKET NO. 12-008-U Page 32 of 32 CHRISTIAN T. BEAM 1 2 3 4 procedures, combined with our talented st aff and focus on safety, quality, cost and schedule performance, ensure that the Flint Creek DFGD project will be successful. Q. DOES THIS CONCL UDE YOUR TESTIMONY? A. Yes. APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6OND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJ J ASOND J FMAMJProject Planning, Conceptual Engineering and Feasibility StudiesFGD Technology Evaluation and RecommendationDeclaratory Order - 9 MonthsAir Permit Review and Approval - 18 MonthsReceive Air PermitPhase IIaEngineering, Design, Permitting and ProcurementDetailed Design, Permitting, Contracting and Site PreparationBOP Civil General Works - Design PackageConstruction Permit GrantedTie in OutageFGD IN SERVICE2011BOP Structural and Mechanical Gen.Works - Design PackageBOP Electrical and Controls General Works - Design PackagePhase IIb Construction20132012BOP Procurement2014Phase I Exhibit CTB-1 - (Level 1) Project SchedulePhase IIb2016Phase IIIFGD Structural and Mechanical General Works ContractorElectrical General Works ContractorCommisioning2015Civil Foundations ContractorReCoAPSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6Exhibit CTB-2 - FGD Technology Options(Using Project-Specific Free Cash Flow Modeling Tool)Rank # CASE #DESCRIPTIONRelative 10yr NPV($000s)Relative 10yrIRRRelative 20yr NPV($000s)Relative 20yrIRRRelativePayback (Yrs.)1Case 3DFGD NID + FF [27 mos] - 0.8 lb/Mmbtu- - - --2Case 7 DFGD NID + FF [30 mos] - 0.8 lb/Mmbtu($2,379)-1.9%($3,210)-0.2% 0.23Case 5DFGD SDA+FF - 0.8 lb/Mmbtu($2,871)0.5%($1,867)0.0%(0.0)4Case 6 DFGD NID+FF [24 mos] - 0.8 lb/Mmbtu($7,032)0.2%($6,463)-0.1% 0.15Case 4DFGD CDS+FF - 0.8 lb/Mmbtu($40,551)-1.9%($36,968)-1.0% 0.86Case 1WFGD + WESP - 0.8 lb/Mmbtu($126,149)-5.7%($120,272)-2.9% 2.77Case 2 WFGD + Spray Tower&FF - 0.8 lb/Mmbtu($159,678)-6.9%($151,512)-3.5% 5.9Ranked in order of "Relative 10-Yr NPV" (as well as other objective risk factors)Summary: Flint Creek Unit 1 FGD Technology (& Timing) ScreeningRelative Free Cash(<COST>/ SAVINGS)vs. Lowest Cost CaseSWEPCO SWEPCOAs-Spent 2011-2040Retrofit CPW Cost over Cost over Cost overRetrofit orCapital Revenue NID(Case 7) NID(Case 3) NID(Case 6)Replacement In-Service Cost Requirements7/2016 In-Svc4/2016In-Svc1/2016In-SvcRankOptionDate($000)($000)($000)($000)($000)1NID 30-mo. (Case 7)7/1/2016 193,360 19,436,651-(15,878) (32,031)2NID 27-mo. (Case 3)4/1/2016 199,230 19,452,52915,878-(16,153)3DFGD SDA (Case 5)1/1/2016 203,500 19,464,45527,80411,927(4,226)4DFGD NID 24-mo. (Case 6)1/1/2016 205,635 19,468,68132,03116,153-5DFGD CDS (Case 4)4/1/2016 223,247 19,483,56846,91731,039 14,8866Wet FGD (Case 1)4/1/2016 271,653 19,556,872120,221104,344 88,191Summary: Flint Creek Unit 1 FGD Technology (& Timing) ScreeningRelative REVENUE REQUIREMENT(COST /<SAVINGS>)vs. Lowest Cost Case(Using System-Holistic Strategist®Resource Optimization Modeling Tool)Timing Sensitivities APSC FILED Time: 2/8/2012 1:59:44 PM: Recvd 2/8/2012 1:55:27 PM: Docket 12-008-U-Doc. 6