Century Aluminum electricity rate case hearing starts on July 30

Live testimony in the evidentiary hearing that begins on Mon., July 30, in the Century Aluminum electricity rate case before the Public Service Commission of West Virginia may be less restrained than the written direct testimony that has been filed so far.

"Prefiled testimony is generally gone over very carefully by lawyers and sanitized," said Jackson Kelly lawyer Christopher Callas, who is not involved in the Century case but has long experience with utility filings before the commission.

"Once you get a witness on the stand, if there's some pressing examination by one of the lawyers or the commissioners you'll get some perhaps more frank views expressed," Callas said.

Century has proposed that, before it commits to re-opening its Ravenswood aluminum smelter, other Appalachian Power ratepayers be required to insulate it from the risks posed by low aluminum prices.

Other large energy users have, for the most part, refrained from commenting in the media and have kept their comments to the commission formal.

But a close reading of the written direct testimony filed on large energy users' behalf points to strong opposition that may come through more clearly in person before the commission.

"Century's proposed special rate is completely unprincipled from a regulatory standpoint," wrote consultant Rick Baudino, a former utility economist, in direct testimony filed on behalf of the West Virginia Energy Users Group that includes Air Products and Chemicals Inc., Bayer CropScience, Bayer MaterialScience LLC, E.I. du Pont de Nemours and Co., Huntington Alloys Corp., PPG Industries Inc., and West Virginia Manufacturing.

The proposal fails accepted regulatory principles used to evaluate whether special electric rates are reasonable and in the public interest, Baudino wrote. For example, special contract rates should do no harm to other ratepayers and shareholders, he wrote — a principle that Century's proposal clearly does not follow.

Baudino emphasized how Century's request appears to other large energy users, who have continued to purchase power from Appalachian Power and sister company Wheeling Power while the Century plant has been idle since February 2009.

"These large customers have been contributing their fair share, while continuing to employ West Virginians and make contributions to the West Virginia tax base and economy, and they have done so while bearing significant rate increases from APCo and WPCo and doing their best to maintain their competitiveness in difficult economic times," he wrote.

Beyond a share of the $17.3 million of lost fixed-cost contribution borne by these large customers, he wrote, Century now proposes that they also bear a share of the virtually unlimited risk of cost under the proposed special rate.

"This is, simply put, untenable and unreasonable," he wrote.

With regard to aspects of the proposal that could allow Century to purchase power from Appalachian Power below the utility's cost of fuel, Baudino commented, "In my 30 years of utility regulatory experience, I have never seen a special rate contract that would allow a regulated electric company to sell electricity at rates that do not even cover the cost of fuel."

Comments that Steel of West Virginia President and CEO Tim Duke made to The State Journal not long after Century filed with the commission in May give a direct indication of other large energy users' reactions to the proposal.

"We have dealt with our own significant increases in electricity rates over the past few years, operating our own steel plant — I certainly don't want to worry about aluminum prices," Duke said.

"I've never asked for other people to insure us," he added. "Every manufacturer will want to try to negotiate their best deal and that's okay but not at the expense of other manufacturers."

Documents filed in the Century Aluminum rate case may be found on the PSC's website at www.psc.state.wv.us/WebDocket; search for case number 12-0613 and choose "activities."