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Felman Production wants special rate, says consumers won't be harmed

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Sometimes one bad apple can spoil the bunch.

In this case, the bunch would be energy intensive industrial consumers who want to take advantage of a 2012 bill to allow those customers a special rate for electricity.

And some would consider Century Aluminum to be the bad apple. 

The company, headquartered in Chicago, closed its Ravenswood aluminum smelter in 2009, and its spokesman repeats that reopening the plant is a priority. After the company requested a special electricity rate that both Appalachian Power and the Public Service Commission of West Virginia deemed an unfair burden to other power customers, a year-long rate case analyzed the company's requests for help to reopen.

The plant is still closed and after the lengthy seesaw ride the company has been on with the state and its former employees, some have accepted that maybe it's for the better.

Then along comes Felman Production Inc., which is owned by Georgian American Alloys, with a request for a rate that it claims would help it reopen its Mason County plant.

But on top of explaining the rate it's petitioned the PSC for, Felman officials also are spending time explaining away the stigma now attached to special electricity rate requests.

"There are a number of very important differences between us and Century," Georgian American Alloys CFO Barry Nuss said this week. "For one thing, part of Century's proposal was a tax credit; that's not part of the Felman proposal at all.

"Century asked for not only the fixed cost to be discounted but for Appalachian Power to contribute another $2.3 million … plus additional amounts required for them to break even … so it was open-ended."

Nuss explained the Felman plan, in its simplest terms, is a risk-free option for Appalachian Power customers.

Nuss said he thinks the Felman proposal aligns with the purpose of the legislation and would enable the company to resume its Mason County operations. He said the plant is currently shut down, which affects about 500 direct and indirect jobs as well as about $2 million in tax revenues. In August, the company explained the decision was made because of continuing high manufacturing costs and low prices for its product, which is a deoxidizer and alloy additive used to manufacture steel.

"If Felman doesn't receive this relief from its current electric rate, it will permanently eliminate those 500 direct and indirect jobs," Nuss said. "If Felman were to permanently shut down, the fixed component of its costs … would still be there for the power company, and it would have to spread those to other rate payers."

Felman said the 10-year proposal limits the amount Felman can receive to the amount of the fixed costs. And when market prices for its commodity go up and down, the special rate would allow for a "sustainable operation." 

Nuss explained Felman could pay lower electricity rates when times are tough and would pay much more for electricity when the market brought more money its way.

"Worst case, they pay the same rate if Felman shut down, and the best case would be no increase at all and more than 500 jobs would be saved," he said. "Bottom line, the other customers would never be worse off."

Steve Ferguson, director of regulatory services for Appalachian Power, said Felman already has a special contract that allows for interruptible power, but it does not come with any discounts. He said he has not yet been able to "verify their numbers," from the company's proposal, so it's too soon to make any judgments.

But Appalachian Power spokeswoman Jeri Matheney says she doesn't expect special rate cases to pop up like this every year.

"I really don't anticipate many companies requesting something like this because the law is written very narrowly," she said. "This wouldn't apply to many other people."

Ferguson said each proposal has to be looked at and decided on a case-by-case basis, and special rates aren't bad on their face.

"The ultimate results could be a beneficial position for the company making the filing, such as Felman, and the economics around Mason County where they're located, so it has its positive impacts, if an agreement or Commission order is to be reached," he said. "There's no relationship between what Century had and what they were looking for and what Felman has and is looking for."