All eyes are now on the West Virginia Public Service Commission to make a decision in the electricity rate case for Century Aluminum.
Thousands of pages of testimony, letters of protest and most recently reply briefs from the five parties to the case have been filed since May.
The Ravenswood smelter, which closed in 2009 and eliminated 650 jobs along with health care for its retirees, has been in rate negotiations to reopen that plant.
The West Virginia Legislature passed a new bill in March to allow a severance tax credit for coal mined to restart the plant, and the company started rate negotiations with Appalachian Power. When those fell through, Century's potential proposal was presented to the PSC in May.
Leading up to a Decision
From Jan. 1, 2011 to Aug. 28, 2012, the PSC has received 119 letters in protest of Century's proposal and 27 letters in support of the proposal, which would tie the plant's electricity rate to the costs of aluminum on the London Metal Exchange and potentially push some of the bill to all other Appalachian Power ratepayers.
After three days of evidentiary hearings in late August, each party submitted initial briefs that reiterated their positions, and in the case of the PSC's Consumer Advocate, offered up final suggestions for how to strike a balance between the plant and the public.
‘Las Vegas roulette gamble'
The West Virginia Energy Users Group wrote in its reply brief that Century is attempting to shift "the entire risk of its requested special rate to other ratepayers."
"Indeed, as Century unequivocally confirmed in its initial brief, the only logical, though unfortunate, conclusion to be drawn from the best evidence in this case is that Century is not capable of operating in the current economic environment, with or without the requested special rate," the WVEUG's reply brief reads.
"Accordingly, the commission should reject Century's special rate proposal outright, and not foist upon APCo's ratepayers the responsibility of being involuntary financiers of a Las Vegas roulette gamble that imposes upon these ratepayers all of the stakes without requiring any ‘skin in the game' from Century," the reply brief continues.
The WVEUG's reply brief described the PSC's Consumer Advocate Division alternatives as "just and reasonable options," that balance the interests of all the involved parties.
The WVEUG alleges in its reply brief that Century "manufactures a legislative justification for its unjust and reasonable rate," because the act the Legislature passed in May names the plant reopening as a "policy goal," and allows "explicit consideration" for "economic development."
The WVEUG's reply brief contends, however, that any electricity rate that would saddle the public with "an economic burden, in the form of an embedded subsidy of $17.3 million plus potentially massive additional rate shifts, that is unjust, unreasonable and does not fairly balance the interests of other stakeholders."
"An our way or the highway approach"
Since Century's Ravenswood smelter closed in 2009, WVEUG members have paid rate increases of as much as 70 percent, according to the reply brief.
The WVEUG also criticizes Century's evidence presented during the rate hearing.
"In fact, even accepting Century's evidence as the ‘best evidence' in this case, the ‘best evidence' clearly shows that there is nothing better than a 50 percent chance that the (London Metal Exchange) price over the life of the rate will exceed the ‘break-even' point necessary for Century to stop receiving an additional subsidy and thereby return ‘some' benefit to ratepayers," the WVEUG's reply brief reads.
The WVEUG states, in its reply brief, that the Legislature's most recent act does not mandate the PSC take any action in the case, other than evaluating a special rate proposal. The WVEUG also describes what Century has offered the PSC as an "our way or the highway approach to its special rate request."
The reply brief also calls two of the consumer advocate's alternatives — asking Century to go directly to the wholesale market by purchasing power through Ohio Power Co. as well as the "do no harm proposal" that would ass protections to West Virginia ratepayers — both "very reasonable."
Century Changes the Rules
Century Aluminum opens its reply brief by going straight to the West Virginia code, saying it "is, and was intended to be, a clear departure from standard electricity utility rate cases," the reply brief reads. Century's reply brief cites the Consumer Advocate Division's "do no harm" alternative plan as an example of everyone else in the case playing "tennis on a racquetball court," because it does not permit the possibility of a rate shift.
"They wish to take off the table what the Legislature clearly directed the commission to consider," Century's reply brief reads.
Century's reply brief states that the CAD makes two errors, and continues to claim "the Legislature clearly wanted to change the rules and did so."
Century also claims, in its reply brief, that its modified proposal was created based on Appalachian Power's tariff rates, and it intended to fully compensate the power company.
Century's reply brief claims that in its modified proposal, the company is not guaranteed a profit, and is prohibited from earning one when aluminum prices are $1,800 a ton or lower on the London Metal Exchange, something it says the WVEUG "overlooks" in its initial brief.
Addressing the Open Market
Despite comments from Century's President and CEO Michael Bless that the company could make a profit by getting its electricity from the open market, the company's reply brief backs away from that option.
"The process for the commission to adopt a deregulation plan is daunting, as is the challenge of constructing a deregulation plan which satisfies the multiple stakeholders," Century's reply brief reads. "Nowhere in its testimony did Century propose such an alternative.
"This proposal is a diversion to prevent the commission from considering the facts before it on the law that is in effect."
Century's reply brief also defends the long-term viability of the Ravenswood facility, something the new law requires but other parties to the case have doubted.
"As a less efficient facility than most of its competitors, the Ravenswood facility does have higher operational costs, however, it has an advantage over its newer competitors in that it has lower debt service expense," Century's reply brief reads. "Century acknowledges the need for ongoing capital expenditures, and it has committed to making those."
Century's reply brief also takes a stance on risk: "Risk cannot be considered in isolation from reward," the brief states. "The reward is enormous. The return of a vibrant economy to an area devastated by the smelter's closing, and the possibility of electric rate reductions."
Century also reiterates that it cannot reopen under the CAD's proposed "do no additional harm rate," nor the requested plan the PSC asked Appalachian Power to submit on the final day of evidentiary hearings.
"The parties opposing the proposed special rate are long on rhetoric and short on law and evidence," Century's reply brief reads. "Finally, the risks and reward presented by the proposed special rate are not unreasonable. Under the evidence the downside risk to APCo and other ratepayers is low."
Appalachian Power Picks Sides
The reply brief from Appalachian Power also starts with the new legislation, claiming it was "deliberately crafted not only to capture Century's specific characteristics, but also effectively to exclude any other known energy intensive industrial consumer of electric power in West Virginia."
Appalachian Power's reply brief attacks Century's assertions that it "will not be willing to restart the Ravenswood smelter unless it receives whatever level of subsidy it demands and unless it is allowed to shift to others whatever financial burdens and business risks it wishes to shift."
Appalachian Power's reply brief states that nothing the PSC or the parties to the case can do would change Century's opinions "as to its profit expectations or its business-risk tolerance."
Appalachian Power's reply brief also claims that "Century expects others to rely on the possibility of its accurately predicting future LME aluminum prices, while Century itself declines to accept such a risk," describing it as an "irony."
Appalachian Power's reply brief also addresses the possibility of Century purchasing power on the open market.
"Of course, there are rights and responsibilities associated with being part of a utility's certified territory, and the (Public Utilities Commission of Ohio) might wish to review different options," Appalachian Power's reply brief reads. It also proposes a unique arrangement the company could ask of Ohio to avoid certain fees, but then explains Ormet Aluminum got a similar unique arrangement from the PUCO, but it took more than two years and an appeal to the Supreme Court of Ohio.
"Another far simpler alternative was suggested by the WVEUG: the expedient of delaying the planned restart of the Ravenswood Plant until more propitious economic times … ," the reply brief reads. "APCo does not object to the exploration of either of these alternatives."
Appalachian Power's reply brief reiterates, however, that the company is "sensitive to the necessary rate burdens which its customers are bearing," and while it appreciates the Consumer Advocate Division's most recent proposal, Appalachian Power's reply brief claims that whether any support for Century that would come from all other ratepayers would constitute an unreasonable burden "is a decision entrusted to the judgment of the commission."
Appalachian Power's reply brief conclusion states that both Century's original and modified proposals attempt to shift "far too much of the burdens and business risks properly borne by Century to APCo and APCo's other customers."
Consumer Advocate Calls it Simple
The Consumer Advocate Division's reply brief takes a 180 from Appalachian Power's reply brief conclusion that called the PSC's impending decision "admittedly a formidable task."
The CAD reply brief introduction claims that "Century's legal posture in this case makes it very simple for this commission to reach a reasoned, defensible decision."
The CAD reply brief also calls Century's special rate proposal "legally flawed," and states that because of Century's representations, the PSC should not analyze any more facts to determine a balanced rate.
"Century has stated it will not reopen with any other special rate than the one it proposed," the CAD reply brief reads. "Game over."
The CAD also likens Century's long-term aluminum market predictions to a Las Vegas game.
"Does Century really believe that West Virginia — our economists, attorneys and commissioners — is unable to appreciate that this means there is a 50 percent chance that other ratepayers will be impacted beneficially or detrimentally?" the CAD reply brief reads.
The reply brief also describes Century's position as "appalling," saying Century's special rate is "without merit and must be rejected."
The CAD also harps on the doubt that Century is willing and/or able to operate for an extended period of time.
"For this reason, it is essential that this commission include in any special rate it authorizes a condition that Century provide some kind of assurance that it also is in this special rate and tax arrangement for the long haul," the CAD reply brief states.
The Consumer Advocate Division also asks for consideration of the timing of the market swings that could make it impossible for Century to ever repay a deficit.
"The easiest way to achieve these assurances is to adopt the CAD's ‘do no additional harm' alternate rate proposal, which has the support of (PSC) staff and WVEUG," the CAD reply brief reads.
And the CAD reply brief goes so far as to say the proposed order Century filed with its initial brief is "completely self-serving," and "should be ignored."