Editorial: PSC rightfully protects the other electric ratepayers in Century case
In considering a case that had the fate of hundreds of jobs and electricity customers' pocketbooks hanging in the balance, the West Virginia Public Service Commission has crafted a response that looks out for both interests.
In issuing an order last week on Century Aluminum's request for a special electricity rate that would allow it to reopen its aluminum smelter in Ravenswood, the PSC offered the company a degree of flexibility that ties its electricity rate to the price of aluminum.
At the same time, the PSC made it clear that Century's request for other Appalachian Power customers to carry an extra burden if aluminum prices failed to rise was unreasonable. As a result, Appalachian Power customers will not be at risk of paying higher rates just to allow Century to stay in business.
Century shut down its Ravenswood plant in 2009, leaving more than 650 workers without jobs. But Century this year announced its hope to reopen the plant -- if it could obtain a special rate structure on electricity, which is the plant's biggest single cost.
State lawmakers approved a tax credit worth up to nearly $20 million a year aimed at helping the plant to reopen, but the company still filed a request with the PSC for a special electricity rate structure. Century asked to pay a fluctuating electricity rate tied to aluminum prices. A key part of its plan was that during periods when it paid a rate below the actual cost of the electricity it used, the difference would be spread among Appalachian Power's other customers. There was no limit on how big that subsidy could be, meaning that if aluminum prices didn't rebound, ratepayers would have to pay higher electricity costs.
That part came under heavy criticism from other Appalachian Power customers, and rightly so. Appalachian Power's other customers shouldn't be unwilling participants in the company's gamble to make the plant profitable.
The PSC's solution is a reasonable alternative.
The commission's order says that Century has to pay a minimum price for power over the life of a 10-year contract with Appalachian Power. However, its electric bills during the course of that period will go up or down based on aluminum prices. At the end of that period, if Century owes Appalachian Power for the smelter's actual power usage, the company would be responsible for making up the difference.
In devising its order, the PSC took to heart testimony from an expert witness supplied by Century. That expert told the PSC that aluminum prices would be high enough over the next 10 years so that Century and Appalachian would end up coming out even.
The PSC order will not go into effect unless Century and Appalachian Power agree to sign a 10-year contract outlining the specifics in the PSC's order. An Appalachian Power spokesman said the PSC's plan appeared to be acceptable. Now it's up to Century Aluminum whether it will accept the provisions and move ahead with reopening the plant.
We hope the company does, so that the lost jobs can be restored. The company will have to decide, knowing full well that it will have to make a go of it without subsidies from other Appalachian Power customers.
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