Parties to Century hearing suggest plant return to Ohio Power - Business, Government Legal News from throughout WV

Parties to Century hearing suggest plant return to Ohio Power

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CHARLESTON, WV -

To a person listening to the three days of evidentiary hearings with the West Virginia Public Service Commission to determine a new electricity rate for Century Aluminum's Ravenswood plant, it may seem the simplest way to keep the burden of the company's power bill off everyone else may be to get rid of the plant altogether.

Free Market Fears?

"We're not afraid of going to the free market," said Century Aluminum President and CEO Mike Bless during an episode of "The State Journal's Decision Makers," a weekly public affairs show produced by West Virginia Media.

That comment did not occur in a vacuum.

Several parties to the rate hearing asked questions of Century officials that related to the idea of the company purchasing electricity from the free market rather than Appalachian Power. There currently is potential for all other Appalachian Power ratepayers to be stuck with some of the cost of Century's electricity.

"Through the media recently, Century indicated it would like to take power on the open market, in Kentucky and here in West Virginia," PSC Commissioner Ryan Palmer said to Gordon Hopper, Century's Ravenswood plant manager, during the hearing. "Why wasn't this a part of your testimony?"

Palmer said Century was an Ohio Power customer for 50 years, and a power line that crosses the Ohio River is still in place.

Switching Sides

Jeri Matheney, Appalachian Power communications director, said when the Century operation was  built in the mid-1950s, a deal was worked out by the governors of both Ohio and West Virginia so the plant would be served by AEP in Ohio.

In 2005, Century asked to be served from West Virginia.

"Ohio was moving to a competitive electricity market, and Century felt that rates in West Virginia were lower and more stable," Matheney said.

A short PSC order issued March 16, 2005, authorized Appalachian Power to provide electric utility service to Century as a retail customer starting Jan. 1, 2006.

Century filed an informational filing Feb. 8, 2005, to notify the Commission that it intended to become a customer of Appalachian Power Company.

"Century noted that it is currently a customer of Ohio Power Company, which is a subsidiary of American Electric Power (Ohio Power), as is APCo," the order reads.

A Deregulated Mountain State?

The PSC in West Virginia launched into a study starting in 1998 and issued an order in 2000 that outlined how the state could have deregulated its power.

Century filed a petition to intervene in that case because it consumes major amounts of electricity during its production process.

The plan was never adopted by the West Virginia Legislature so the case was dismissed, but with a note that the case could be reopened "should electric restructuring be resurrected in the future."

Tom Heywood, a Charleston attorney who represents Century, remembers those discussions.

He said when California was experimenting with deregulation, other states started to look at the idea, but when California's power rates shot up and the state experienced rolling brownouts, the Mountain State abandoned its efforts.

During that case, the PSC found that Century is within Appalachian Power's service territory, and that finding was referenced in the 2005 order that brought Century under Appalachian Power's service.

"APCo noted Century's position that it is entitled to receive electric service from APCo, and that APCo has an obligation to serve Century."

Returning to Ohio

The PSC's Consumer Advocate, Byron Harris, said on "The State Journal's Decision Makers" that it's "ironic" Bless said he could purchase power on the free market at about a $20 per megawatt hour savings.

"When Ohio passed a statute that it was going to go to market (Century) didn't want to take the risk in the wholesale power market, and so they asked to become a customer of Appalachian Power," Harris said on the show. "So now to turn around several years later and say, ‘Oh, we want to go to market,' if he wants to do that, I would say go ahead, because then that takes all the risk off the utility customers of Appalachian Power."

Jacqueline Roberts, who served as the Consumer Advocate Division's attorney during this week's evidentiary hearings, brought the issue up more than once.

"It was an Ohio Power customer for 50 years," Roberts laid out for Henry Fayne, a Century Aluminum consultant during the second day of hearings. "If it became one again, it could realize its dream of going to market."

Fayne's response was that Century's return to the Ohio market would be subject to challenge, just as working out any deal for the company's electricity would take "some sort of special circumstance," he said.

"If there was an arrangement that would allow it to go to market, if it could go to market, I certainly wouldn't recommend it," Fayne said.

What Would it Take?

Heywood, who represents Century, said the company shored up a lot of support from West Virginia parties to get where it is with a rate agreement, and it didn't want to abandon those efforts.

"I think our commission would have to approve – since (Century) came on under a commission-approved order, the commission would have to reverse that order and allow them to go back to Ohio Power," Harris said after the hearings. "It would solve a lot of the problem in West Virginia in terms of requiring, what they say they require, customer subsidies.

"If they can go back to Ohio and effectively purchase power on the open market themselves, then more power to them."

Senior Energy Reporter Pam Kasey contributed to this report.

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