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CHARLESTON, W.Va. (AP) — Appalachian Power might be willing to compromise on a key objection to a proposed clean-coal power plant designed to meet future demand in West Virginia and Virginia.

The American Electric Power subsidiary might agree to cap construction costs for the 629-megawatt plant, Appalachian President Dana Waldo testified during a licensing hearing before the West Virginia Public Service Commission on Monday.

“If the cap was within reason, we would,” Waldo said. Agreeing on a price, however, will be tough, he said. “All construction costs are rising.”

Appalachian Power originally estimated the plant would cost about $1.2 billion to build. It increased the figure to $2.23 billion last year. Nailing down the cost for this plant in particular is difficult because it would be the first commercial-scale generating station in the U.S. to use so-called clean coal technology that burns gas made from coal.

The plant would be built along the Ohio River adjacent to AEP’s Mountaineer generating station in Mason County. Columbus, Ohio-based AEP is proposing to build a similar plant in Ohio.

“We’ve made progress today,” said Billy Jack Gregg, former director of the PSC’s Consumer Advocate Division. Gregg, though retired, is representing the division in the case.

A cap is one of two major objections to the plant. The Consumer Advocate Division and a group of large electricity users also object to Appalachian Power’s request that it be allowed to start raising electric rates in 2009, three years before the plant is expected to be finished.

Appalachian Power projects that electric rates would rise 1.7 percent in July 2009, another 3.2 percent a year later and 5.3 percent in July 2011.

“This case is all about the fair allocation of risk,” Gregg said.

To him, Appalachian Power is trying to shift risk from itself and its shareholders to its customers. “They are trying to turn on its head the normal allocation of risk.”

That’s not proper, said Susan Riggs, an attorney representing the West Virginia Energy Users Group, which includes several major electricity consumers.

Waldo conceded during questioning that the plant would be the most expensive ever constructed by AEP. That’s because the company plans to use so-called clean-coal technology. By burning coal gas, the plant is supposed to be able to remove pollutants such as mercury and sulfur before combustion rather than trying to capture them from exhaust. The plant would be the first commercial-scale integrated combined-cycle gasification plant in the country.

American Electric Power has more than 5 million customers in 11 states.

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