American Electric Power utility subsidiary AEP Southwestern Electric Power Co. has signed a letter of intent to purchase the transmission and distribution assets of Valley Electric Membership Corp. 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).

"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."

"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.

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.

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.