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PSC denies Century Aluminum's special power rate request

CHARLESTON, W.Va. -- The state Public Service Commission on Friday denied Century Aluminum's request for reconsideration of the special power rate plan the commission crafted for the company's Ravenswood plant.

 However, in rejecting Century's request, the commission did leave the door open to let Century and Appalachian Power negotiate their own agreement, so long as it abided by the principles set forth in the original PSC plan.

"We hope to provide guidance that might lead to further discussion among the parties, with the prospect that the parties might ultimately arrive at an acceptable alternative leading to the reopening of the Ravenswood plant," the commission's ruling said.

Century has been working with the state officials all year to craft a special power rate for its shuttered Ravenswood aluminum smelter.

The plant closed in 2009 after the Great Recession triggered a sharp sell-off in global aluminum prices. More than 650 workers lost their job when the plant shut down.

Because the plant's power bill is its highest single expense, Century executives have said the company needs a flexible rate structure that will protect it from wild fluctuations in commodity prices.

The company had asked for rates that rise and fall with aluminum prices. It also proposed shifting costs onto other Appalachian Power ratepayers to make up some costs when prices were low.

In October, commissioners approved a special power rate structure for Century Aluminum. They essentially gave Century the rates they wanted, but said the company would be on the hook for any short payments to the power company.

Century balked at that idea.

The company said the commission's rate plan would not allow it to justify spending the money to restart the Ravenswood plant.

In late October, the company filed a petition with the PSC asking commissioners to reconsider their decision.

In their request, Century proposed two alternative rate plants that executives say could lead to a restart either immediately or when economic conditions improved. One of those alternatives still shifted costs onto other APCo ratepayers.

Critics blasted Century's reconsideration request, calling it a negotiating ploy and an ultimatum to get the plan they had originally asked for.

In its ruling, the commission agreed that Century's counter-proposals went far beyond the scope of a reconsideration hearing.

"In some cases, these changes do not represent mere 'adjustments at the margins' of the special rate mechanism approved by the commission; instead, they are a complete proposed reversal of many decisions underlying the final order," the ruling said.

The commission said the Century proposal that would have allowed the Ravenswood plant to restart immediately -- which included shifting costs onto other ratepayers -- was "fatally flawed."

"The most odious element of the immediate restart plan Century proposed is the potential shift of up to an additional $185 million in Century electric costs to other ratepayers," the ruling said.

"The Commission previously rejected transferring any further payment obligations from Century onto other customers," the commission said.

The commission based its original October ruling on price forecasts provided by Century that said aluminum prices would rise over the next decade.

Given Century's strong rejection of the PSC's plan, commissioners said Century appears to have little faith in those projections.

Appalachian Power also had concerns about the PSC's plan, which required Century to provide a guarantee that it would pay for any power bill shortfalls still on the books at the end of the 10-year rate plan.

Power company officials said they had serious concerns over the financial stability of Century as a company. They argued if Century went bankrupt, they may have no way of recovering their costs of the plan.

Commissioners said they considered other options in their original deliberations, but believed a simple guarantee was enough. However, they admitted they were unsure about that now.

"While we continue to believe that a corporate guarantee by Century and its parent is acceptable, given Century's lack of faith in its aluminum price projections, there is a solid argument that there should be some limitation on the amount of the payable from Century to APCo that is secured only by the corporate guarantee," the ruling said.

The commission said it would consider changing that provision should APCo and Century hash out a modified deal and present it to the PSC at a later date.

The PSC did encourage Century and APCo officials to consider other options to help the Ravenswood plant restart.

The commission said the two companies should come up with a plan that is more than just a "starting point" -- which is how Century described its original proposal -- but rather something more concrete that can be reviewed in a future PSC case.

Commissioners said they want to see the Ravenswood plant restart, and hoped the companies can work out their differences on their own.

"The Commission cannot overstate the importance of this matter," the ruling said. "We know that it affects the local and state economy, impacts the lives of potential employees and retirees, and requires the protection of the utility and ratepayers from unreasonable rate impact and risk."

Contact writer Jared Hunt at jared.hunt@dailymail.com or 304-348-5148.

 


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