WASHINGTON – One of the nation’s largest utilities agreed Monday to close three of its coal-fired power plants as part of a settlement with government officials and environmental groups, the latest sign of how the nation’s electricity supply is shifting away from coal.

Updating an earlier 2007 settlement, American Electric Power will stop burning coal by 2015 at three power plants in Indiana, Ohio and Kentucky and replace a portion of that supply with new wind and solar investments in Indiana and Michigan. The company will spend $5 billion to install pollution controls on plants in its aging, coal-fired fleet in the eastern United States and cut its annual sulfur dioxide emissions over the next 12 years from 828,000 tons to 174,000 tons.

Coal plants, which supply 32 percent of the nation’s electricity, remain the largest U.S. source of both sulfur dioxide and mercury – which contribute to heart and respiratory illness – as well as carbon dioxide linked to global warming.

“We’re glad AEP is going to retire these aging dinosaurs, and urge the company to ensure an equitable transition for the workers and communities most directly impacted by these retirements,” said Earthjustice attorney Shannon Fisk, who worked on the case.

According to the Clean Air Task Force, an advocacy group, closing the Tanners Creek Generating Station Unit 4 in Indiana, the Muskingum River Power Plant Unit 5 in Ohio and the Big Sandy Power Plant Unit 2 in Kentucky will prevent 203 deaths, 310 heart attacks, 3,160 asthma attacks and 188 emergency room visits annually once they stop burning coal.

By modifying the settlement, AEP will be allowed to install cheaper and less stringent pollution controls on its Rockport coal plant in southern Indiana.

The company will now give $6 million to the eight states that, along with the Environmental Protection Agency and environmental groups, filed the original 1999 lawsuit against it to address the pollution that drifts east from AEP plants in the Midwest. The states are Massachusetts, Vermont, Rhode Island, Maryland, New Hampshire, Connecticut, New Jersey and New York. The company will also provide $2.5 million to citizen groups in Indiana so they can address air pollution.

New York Attorney General Eric Schneiderman noted in a statement: “Coal-fired power plants make the largest contribution to air pollution in New York’s skies.”

Sierra Club attorney Bruce Nilles, who helped negotiate the agreement, said the result showed how a combination of market forces and environmental activism had weakened the hand of the coal industry in the United States. But he said that in the face of rising carbon emissions worldwide, environmentalists could not declare total victory.

“The coal industry is cracking faster than the ice sheets, but it might not be fast enough,” he said.