Ormet’s rates tied to aluminum

The Public Utilities Commission of Ohio this week approved an arrangement under which Ormet's electrical rates will be based on the price of aluminum, with other AEP Ohio power customers making up the difference for any discounts. But the PUCO set limits on how much of a discount the company can receive and how much money AEP Ohio can recover in a year. The commission also upped the premium Ormet would pay if the price of aluminum rose higher than was needed for the company's Monroe County facility to make ends meet. According to a release from the PUCO, if AEP Ohio attempted to recover the maximum amount allowed under the deal, it would add less than $2 a month to the average customer's bill in 2010 and 2011. If the discount Ormet receives totals more than the amount AEP is allowed to recover, the power company can recover that at the end of the arrangement, which runs through 2018. Ormet filed a request for the special arrangement in February, describing the deal as "essentially an on-or-off switch" for the Hannibal plant in documents filed with the PUCO. Reno resident Ron Hill, 68, said he shouldn't be on the hook for Ormet's bill. "Would somebody pay my electric bill if I used too much, or would they say, 'shut the electric off?'" he said. "Cut (workers') wages and put it on the electric bill. Why not? I work in construction, and I took cuts all the time." Ormet says power accounts for 30 to 35 percent of the cost of producing aluminum. The request for assistance was made to help the facility stay afloat after aluminum prices plummeted over the last year. The plant employs about 900 people, with an annual payroll of more than $54 million. The estimated economic impact of the plant on the region, including employees in Pennsylvania and West Virginia, is in the neighborhood of $195 million, according to PUCO documents. Maintaining those jobs and economic benefits were key to the rationale for the special arrangement. "It was a huge step in securing Ormet's future and that of its employees," said Ormet spokeswoman Linda King. Ormet and AEP must evaluate the arrangement ordered by the PUCO before putting it into a binding contract, officials with both companies said. AEP spokesman Jeff Rennie said his company must apply to the PUCO before it can start to collect the revenues forgone in the new Ormet deal, as well as a temporary one already in place. The PUCO approved Ormet's request to set a discounted rate based on production levels for the current year. Beginning in 2010, Ormet will submit to the PUCO a "target price," the average price of aluminum that would provide the company with the minimum cash flow to keep operations going. In a brief filed with the commission, Ormet attorneys describe this as essentially "life support." The maximum discount Ormet can receive in 2010 and 2011 is $60 million. That number will be reduced to $54 million in 2012 and then by $10 million a year in subsequent years. The Ohio Consumers' Counsel had advocated an even lower limit on Ormet's discount, about $32 million. However, counsel spokesman Ryan Lippe said the office was pleased with some of the provisions the PUCO added. "Certainly there are more consumer protections in the PUCO's decision than in Ormet's original proposal," he said. Lippe said the consumers' counsel wants to see a statewide standard for dealing with cases like this. Hill expects more such cases be filed, and he'd like to see voters decide on them instead of the PUCO. "I got a funny feeling if this got on the ballot, you'd see the biggest landslide in history" against it, he said. source:www.mariettatimes.com