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Century, AEP Pleased With 'Power Bill' Passage

By Mike Ruben – Thu, 03/11/2010 – 11:19

A newly passed bill will give large manufacturers a way to negotiate their power agreements.

Century Aluminum officials have said a new long-term power agreement is one of the essential elements it needs in place if the company is to restart its 650-employee Jackson County smelter.

One step in that direction was taken March 9 with passage of Senate Bill 656 by the West Virginia Legislature. The House of Delegates approved the measure unanimously.

The bill allows the state's largest industrial users of electricity to negotiate a variable-rate agreement with the power company to present for approval by the Public Service Commission. Basically, it provides the framework for the company's power rate to fluctuate based on commodity pricing (in Century's case, the price of aluminum). The PSC would approve the low and high prices.

Century closed its Jackson County operation in February 2009 citing low prices and a lack of demand for metal. Company officials noted the 52-year-old Ravenswood plant was less efficient than newer operations in Kentucky and South Carolina, which have continued to operate. Spending $8 million per month on electricity, Century was Appalachian Power's largest West Virginia customer.

"We're very supportive of the bill," said Jeri Matheney, a spokeswoman for Appalachian Power. "It's a good thing. Industrial customers are good for our company, good for all of our customers and good for the state as a whole."

"Having Century here and operating is better than not having them operating," she continued. "If something can be done to help that happen; it's a good thing."

Delegate Mitch Carmichael, R-Jackson, agreed, saying the new agreement gives Century "more confidence in their cost structure and some predictability about profit margins."

Carmichael said the long-term result will be better pricing for all customers.

"Century was the second largest customer in the AEP network," he added. "Without Century in the picture, the cost would be distributed over a smaller base."

Sen. Karen Facemyer, R-Jackson, said she was pleased to see the bill approved.

"This gives the plant a major tool to open back up," she noted. "That's good for the community, good for Jackson County and good for the state. It's going to help other plants, too."

One of the bill's opponents, Byron Harris, director of the PSC's Consumer Advocate Division, said the variable-rate pricing agreement was an experiment that did not work well the first time around.

"We tried this once before with Century Aluminum and all of the other customers paid $16 million in increased cost," he said.

He said having the Century facility open is an economic benefit for the state, but questioned whether there was a potential risk for other power customers.

Century's contract with the United Steelworkers of America Local 5668 expires Aug. 31, 2010. The London Metal Exchange reports recent increases in aluminum pricing to above the $2,200 per ton level.