Ormet appeals Ohio PUC ruling on emergency electric rate relief

Louisville, Kentucky (Platts)--16 Jul 2013 426 pm EDT/2026 GMT

Ohio Public Utilities Commission staff is reviewing US aluminum producer Ormet's appeal of last week's decision by a PUC attorney examiner that would likely push a ruling on the company's request for electric rate relief beyond July 31, agency officials said Tuesday.

The company on Monday warned that unless the PUC rules on its proposal to reduce what it pays American Electric Power for electricity at its 260,000 mt/year Hannibal, Ohio, smelter by that date, it will be forced to begin liquidating assets on August 1.

Ormet wants the full commission to hear its request for emergency relief from a power supply agreement with American Electric Power. Hannibal paid AEP $57.99/MWh in the first quarter, well above the national and global averages for aluminum smelters. Ormet is seeking to cut that rate to $45.89/MWh for the rest of 2013 and buy less expensive power from the market beginning in January.

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Wayzata Investment Partners, which in June won US Bankruptcy Court approval to buy Ormet in a deal valued at $282 million, says it will not proceed with the acquisition if a new power agreement is not in place by July 31. Ormet filed for Chapter 11 bankruptcy reorganization on February 25 and Wayzata was the only bidder for the company.

Since Ormet's application for emergency rate relief was denied last week by PUC attorney examiner Sarah Parrot, the company has sought bankruptcy court approval to begin liquidation proceedings in August if it does not have a new power arrangement by then.

In her ruling, Parrot established a procedural schedule that most likely would continue into fall before the PUC issues a final order.

That is too late, according to Ormet, which on Tuesday filed its appeal of the ruling. Ormet said the smelter has been losing money for months because of high power costs and low aluminum prices.

Parrot's decision "forecloses any possibility of putting a solution into place until sometime in September -- well past the July 31 deadline for Ormet obtaining the cash infusions necessary to continue its operations" Ormet attorney Howard Petricoff told the PUC. The ruling has the "very real effect" at a minimum, he added, "of significantly reducing Ormet's operations to two operating lines within the next 30 days, or potentially forcing a complete shutdown of Ormet's operations before the results of the hearing are final."

For more than a year, Ormet has been operating only four of Hannibal's six potlines.

PUC spokesman Jason Gilham on Tuesday said either Parrot or the commission's legal director will rule soon on Ormet's appeal. "They will either certify it or deny it," he said. "If it is certified, it will go before the commissioners to make a ruling" on the emergency rate request. "If it's denied, that's the end of it there."

The United Steelworkers union, which negotiated a money-saving deal for Ormet earlier this year, has no doubt the company is serious about its need to for lower power prices and the threatened curtailments.

"I believe [the company is] serious," John Puskar, a USW staff representative, said Tuesday. "The membership is well aware of the [London Metal Exchange aluminum price] and looks at it every day. So, what Ormet is trying to do with the PUC is say, 'Hey, we need some relief here.'"

Ormet in its appeal asked the PUC to hold oral arguments on its request next week "to allow the commission to fully consider and resolve whether an emergency exists and whether Ormet's request for emergency relief should be granted" before July 31.

--Bob Matyi, newsdesk@platts.com  
--Edited by Jeff Barber, jeff.barber@platts.com

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