With skepticism mounting over Century Aluminum's proposal to restructure its electric rates in order to reopen its Jackson County plant, the company's CEO and president visited the Mountain State this week in hopes of turning the tide.
"We've obviously been following the public discourse in West Virginia since we put in our petition," Century Aluminum CEO Michael Bless said during a recording of "The State Journal's Decision Makers," a weekly public affairs show produced by West Virginia Media.
Bless made several stops July 9, ranging from visits with media outlets in Charleston to talking with Century retirees in Ravenswood.
Century closed its Jackson County smelter in 2009 after a steep market decline in the price of aluminum. More than 650 workers were left without jobs and a bad taste in their mouths that grew worse with each year the plant remained closed.
The retirees' health benefits were completely suspended by the company last year. The reinstatement of those benefits has been tied to the company reaching an agreement with Appalachian Power for a new electricity rate. The new rate, Century says, is needed to reopen the West Virginia plant.
"We explained to Mr. Bless that the ‘fairy tale' ending was going south fast, and the general public was seeing Century once again as just another ‘greedy' corporation," Century retiree spokeswoman Karen Gorrell said in a prepared statement. "Mike assured us that the sole purpose of his trip from California was to try and clear that perception up and to reassure all concerned that they were very serious about a restart, sooner rather than later."
Bless stuck to that message repeatedly.
"All we know is that we are sincere and absolutely committed to restarting this plant, from our board of directors through our senior management team on down to local management here," Bless said.
The Free Market?
But in order to get the plant started, Century says it needs a lower rate. Its proposal to accomplish that has met with opposition thus far.
"We made a proposal we think makes sense, but we want to get this plant reopened, and we're open minded," he said. "If other people have ideas, we're as open minded as can be — bring them to us."
Bless said if Century was able to go off the regulated system and buy power in the free market, it would save about $20 per megawatt hour.
"We're not afraid of going to the free market," Bless said.
Charleston attorney Tom Heywood represents Century and explained the idea of deregulation.
"I suppose in the purest form, you or I could go on the Internet and buy from a utility in Georgia and the utilities would simply wheel power around," Heywood said. "So Century does not have the right under current law to go into the open market to find power — it's obligated to buy from Appalachian Power."
Heywood remembers when the idea of deregulating power floated through the Legislature.
Heywood said when California was experimenting with deregulation about a decade ago a bill was introduced to the West Virginia Legislature, but California power rates shot up and the state experienced rolling brownouts, so the Mountain State abandoned its efforts.
Heywood said Century has shored up a lot of support from a lot of parties in West Virginia to get where it is now with a rate agreement, and it's not about to abandon that.
"Century is focused right now on the petition that it's submitted," he said. "To the question, ‘Could an open power market solution help you meet your needs?' the answer would be, ‘Yes.' But we believe that would be major legislation; there's a lot implied: Where would you draw the line? Who could buy from the open market as opposed to who has to buy from the utility?
"There are a lot of policy questions, and one of the realities is the state abandoned that."
Century retiree spokeswoman Gorrell, who submitted one of the early letters of support to the PSC for Century Aluminum, said in her July 10 statement "there just has to be a better way."
"I explained to Mr. Bless that as desperate as we are for our health care benefits, we could not support a power arrangement that would impose additional costs on folks with limited incomes," she said.
"People have suggested alternatives," Heywood said. "It's quite possible that what the PSC comes up with is a different solution to what Century suggested.
"Century is listening to all parties. There may well be other approaches that work. The one of a market power solution is outside the special rate."
Appalachian Power Communications Director Jeri Matheney said if West Virginia was no longer regulated and Century went into the free market for electricity, the company would face even more volatility without any subsidies.
"The price may be OK today, but would he want to come back to a regulated utility a couple of years from now?" Matheney said.
Plant Is Viable
Heywood said the Jackson County facility is viable for several reasons — the plant has received hefty investments through the years, and the plant uses a more modern, more efficient and more environmentally sound process for making aluminum.
But a restart relies on the 10-year projections from Robin Adams of CRU International.
"The reason for the special rate is that aluminum prices quarter-to-quarter and year-to-year are volatile, but the long-term trend of 20, 30, 50 years is clear — prices rise," Heywood said. "That's why you need this rate that floats: Century pays more when it can pay more and pays less when it's making less, and that's what keeps them from turning the lights off."
The CRU projections show that in seven or eight years, the rest of the world will begin to run out of aluminum smelting capacity. Heywood said in recent years there has been an overcapacity to create it, but in the intermediate- and long-term, there is a demonstrated likely shortage of smelting capacity.
Bless said Century has had people at the Jackson County site recently, there has been investment already to get machinery prepared to reopen and there is an efficient work force ready to return.
Poor Public Perception
The ire that spurred Bless's goodwill tour came from a closer analysis of the proposal Century made May 11 to the West Virginia Public Service Commission for a new power rate.
Century and Appalachian Power were unable to come to an agreement on a new rate to reopen the aluminum smelter.
Appalachian Power President and COO Charles Patton said his company realized Century needed help that would have to come from each ratepayer, and Appalachian Power thought that kind of decision needed to come from the PSC.
Since Century's May 11 PSC filing, 64 letters of protest have been sent to the PSC. The PSC has received 10 letters of support of Century's petition.
"The plant just regrettably can't open at (Appalachian Power's) tariff today of about $52 per megawatt hour," Bless said during his interview on "The State Journal's Decision Makers." "(Through the PSC process, we were asked to) propose a mechanism for how we would pay for the power price over the next 10 years based on our proposal."
Century's petition to the PSC relies on three layers to defray its costs for electricity: a tax credit approved by the 2012 West Virginia Legislature; a combination of costs ratepayers already absorb along with Appalachian Power shareholder contributions; and an additional subsidy from all Appalachian Power ratepayers if the market price for aluminum is too much for Century to bear.
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