Century urges for a fairer power rate to save its Hawesville smelter

Century Aluminum officials want Big Rivers Electric Corporation to file new rates with the Kentucky Public Service Commission that would provide them with a lower rate, and they want Big Rivers to use $150 million in reserve funds to offset the impact the cost-shifting would have on the utility's 112,000 customers.

The Monterey, Calif.-based company said again this week that without a more fair power rate, its Hawesville smelter can't survive under current market conditions.

Century and Big Rivers have been in discussions to find a solution for the Hawesville aluminum smelter's reported financial crisis given the low market selling price for aluminum and the high cost the company pays for electric power.

Century also provided more answers in its communications Monday regarding how the power contract termination would play out for the plant and its 771 employees.

Once the company gives notice of termination of the power contract, the smelter can be closed at any time, according to Century. The power contract requires the company to pay Big Rivers the demand charge for 12 months, but it does not require the plant to remain open.

Century also said it is in the process of discussion with the union how it can make the plant more competitive, but it does not comment on ongoing discussions.

Without securing short term relief, the plant is not viable given the current market conditions, the company said in an email response to questions.

Big Rivers contends, however, that the three reserve funds Century has proposed to use for its financial crisis should be used in one of the ways intended -- to help nonsmelter customers in case Century or Rio Tinto Alcan, another aliminum smelter and Big Rivers' customer, leaves the utility; for rising fuel costs or environmental expenses; for fuel or environmental costs after the second fund is depleted.

And Big Rivers already has a use in mind for these funds -- to reduce the electric bills for nonsmelter customers when a surcharge rate hike comes down the pike as a result of Big Rivers' environmental compliance plan. The utility has to build new or add to its pollution control systems to meet new federal guidelines.

The PSC held a meeting last night in Paducah to get public input on Big Rivers' environmental compliance plan. Another meeting is scheduled for today in Henderson.

Century continues to dangle "before Labor Day" as a trigger for terminating the power contract.

"We need short-term relief immediately. If we do not see movement from BREC shortly, we will have no other option but to terminate the power contract sometime later this month," the company said.

Century contends that Big Rivers could "unilaterally file a rate case with the PSC on an expedited basis that would provide the smelter with the support it needs," which would involved using the reserve funds.

"After we have concluded that PSC process, we think a long term solution will need to be worked out that may involve other parties, including elected officials, other utilities in the state, etc. Given the urgency, we cannot wait for long-term solution to be developed," Century said.