October 3, 2013
State regulators have approved some, but not all, of the electricity subsidy increase that Ormet Corp. has said it needs to stay in business.
Now, it is up to Ormet and its prospective buyer, Wayzata Investment Partners, to decide whether the aid is enough to keep the company viable, a process that will take some time.
The Public Utilities Commission of Ohio unanimously passed the plan yesterday, though commissioners said they are uncomfortable with aspects of it.
Ormet, an aluminum smelter based in Hannibal, has already received $308 million worth of electricity discounts, which are financed through charges on all American Electric Power customers in the state. The company has about 700 employees, making it one of the largest employers in that part of southeastern Ohio.
“The commission recognizes the importance of Ormet, and in arriving at its decision today considered the need to balance that importance and what is fair to all of AEP Ohio’s other ratepayers,” said Todd Snitchler, PUCO chairman.
The PUCO estimates that Ormet’s request was for another $56 million to $119 million in aid. While it is clear that the company will get less than that, a precise figure was not available yesterday.
Several Ormet employees made the trip to Columbus to attend the meeting.
“I believe everyone understands that Ormet needs to come up with a long-term answer,” said Tom Byers, an employee and president of the plant’s union. “Ormet needs to stand on its own two feet."
None of the participants had immediate comments about the ruling itself because they were still going over the details.
Ormet sought the following:
• An acceleration of payments, allowing the company to receive aid money in 2013 and 2014 that it otherwise would receive in smaller increments through 2017. The PUCO approved this.
• A fixed electricity-generation price of $45.89 per megawatt-hour for all of 2013, which would be less than the current discounted price. The PUCO set the price at $50, which is still less than Ormet is paying now but not as deep a discount as it wanted.
• An extension of the timetable to pay electricity bills deferred from 2012. The PUCO rejected this.
Ormet has struggled in recent years because of low aluminum prices and rising electricity rates. It is AEP’s largest customer in the state, and its discount is also the largest in AEP territory, costing each household $2 to $3 per month.
Terri Flora, an AEP spokeswoman, said the utility “will continue to support Ormet” and try to help it find a way to become sustainable.
State officials have tried to avoid a shutdown of the plant, at the same time that they have dealt with complaints from consumer advocates that the subsidy is far too generous.
“I sign today’s order not because of any confidence in Ormet’s management, but because of the potential devastating impact of the region’s largest employer closing,” said commissioner Steve Lesser.
In recent weeks, some state officials have suggested that West Virginia should provide part of the subsidy, since many of Ormet’s employees live in that state.