03 JULY 2012Platts
Ormet warns of smelter closure if elecricty rate plan for AEP Ohio is approved
Edited by : AL CIRCLE
2 min read
US aluminum producer Ormet warned Ohio regulators Monday it could be forced to shut all or part of its 260,000 mt/year Hannibal smelter if said regulators approve a pending electric security plan for AEP Ohio, an American Electric Power subsidiary.
Ormet said electricity costs at the smelter already are rising despite a "unique arrangement" it entered into with the utility a couple of years ago that ties power costs to the price of aluminum on the London Metal Exchange.
AEP Ohio says its proposed plan would increase rates by an average of only 5%, but Ormet disagrees, arguing they would be much higher. Ormet buys about 505 MW of power around the clock from AEP Ohio, and electricity accounts for about 30% of the smelter's operating costs.
"The increases proposed in this proceeding would add to other significant recent rate increases," Ormet told the Ohio Public Utilities Commission in a filing. "The delivered rate that Ormet pays for power now is already 58% higher than in 2010 ... in short, even with its unique arrangement in place, Ormet's delivered price for power has increased sharply and steadily over the last four years."
The anticipated increases in AEP Ohio's rates over the nearly three-year term of the ESP, "will strain Ormet's ability to continue operating," the company said.
"The bottom line is that the cost of electricity has been rising rapidly while the LME price of aluminum has been depressed. As a result, Ormet cannot absorb the proposed rate increases and may be forced to curtail all or part of its operations and eliminate jobs," it said.
The Hannibal smelter employs 1,050 people whose annual wages and salaries total $63 million, making it one of the largest employers in southeastern Ohio. The smelter operates six aluminum-making potlines.
PUC Chairman Todd Snitchler said Monday the regulator expects to issue a final order in the AEP Ohio case by August 8.
Ormet said electricity costs at the smelter already are rising despite a "unique arrangement" it entered into with the utility a couple of years ago that ties power costs to the price of aluminum on the London Metal Exchange.
AEP Ohio says its proposed plan would increase rates by an average of only 5%, but Ormet disagrees, arguing they would be much higher. Ormet buys about 505 MW of power around the clock from AEP Ohio, and electricity accounts for about 30% of the smelter's operating costs.
"The increases proposed in this proceeding would add to other significant recent rate increases," Ormet told the Ohio Public Utilities Commission in a filing. "The delivered rate that Ormet pays for power now is already 58% higher than in 2010 ... in short, even with its unique arrangement in place, Ormet's delivered price for power has increased sharply and steadily over the last four years."
The anticipated increases in AEP Ohio's rates over the nearly three-year term of the ESP, "will strain Ormet's ability to continue operating," the company said.
"The bottom line is that the cost of electricity has been rising rapidly while the LME price of aluminum has been depressed. As a result, Ormet cannot absorb the proposed rate increases and may be forced to curtail all or part of its operations and eliminate jobs," it said.
The Hannibal smelter employs 1,050 people whose annual wages and salaries total $63 million, making it one of the largest employers in southeastern Ohio. The smelter operates six aluminum-making potlines.
PUC Chairman Todd Snitchler said Monday the regulator expects to issue a final order in the AEP Ohio case by August 8.
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