By Carole Vaporean
NEW YORK Oct 2 The Public Utilities Commission
of Ohio voted on Wednesday to approve Ormet Corp's
revised power deal with energy supplier American Electric Power
Co Inc, saving the U.S. aluminum producer from likely
The commission added, however, that it was modifying parts
of Hannibal, Ohio-based Ormet's request for a unique subsidized
power arrangement, as it works to emerge from bankruptcy.
PUCO Chairman Todd Snitchler said at the commission's weekly
meeting, monitored by webcast, that approval was also contingent
on Ormet employing at least 650 full-time workers through 2018.
Ormet is the region's largest employer, as well as Ohio's
largest energy user.
In February, Ormet filed for bankruptcy protection. Cutting
the high cost of energy to run its 270,000-tonne-per-year
aluminum smelter was the final hurdle on the path to emerging
On June 3, Smelter Acquisition, LLC, a portfolio company
owned by Wayzata Investment Partners, said it would acquire
Ormet. U.S. based Wayzata's requirement to close on the
acquisition also depended on approval of Ormet's new power plan.
"We authorize Ormet to assign its interests to Smelter
Acquisition, LLC, according to terms under the existing unique
arrangement," Snitchler said.
He added that the commission granted Ormet relief with the
understanding the aluminum company, or its successor, "would
maintain employment levels at or above 650 full-time employees
throughout the term of the agreement ending Dec. 31, 2018."
The commission said it recognized Ormet's economic
importance to the region, but wanted to balance those interests
with the concerns of local rate payers, who would be subsidizing
part of Ormet's power costs with increases to their own bills.
Ormet's request for a new unique rate arrangement was valued
between $56 million and $119 million dollars, over and above
the $346 million in financial support already granted by the
commission since 2009.
Given that Ormet's latest request for subsidies would add to
earlier increases in the monthly bills of individual rate
payers, the commission voted to approve a modified arrangement
for the aluminum producer, Snitchler said.
Ormet had asked for an average fixed rate of $45.89 per
megawatt-hour, but the commission capped the rate at $50 per
megawatt-hour, excluding the discount, through Dec. 2014.
From January 2015 through 2018, Ormet will be billed
according to the terms of the current arrangement, keeping its
pricing in line with other large industrial power users.
The commission also approved Ormet's request to front load a
discount that would have been spread over the next five years.
Instead, $66 million will be moved up to 2013 and $54 million to
2014, giving Ormet, "time to sustain operations until it returns
to profitability, make its deferral payments, and construct its
own power plant to mitigate and stabilize its power costs."
The commission also modified Ormet's discounts to say that
AEP Ohio ratepayers would receive a refund if benchmark aluminum
prices exceed Ormet's break even level of $2,200 per tonne.
With London Metal Exchange aluminum prices at $2,200 to
$2,500 per tonne, Ormet will pay 104 percent of the AEP Ohio
tariff rate. If aluminum rises above $2,500 a tonne, Ormet will
pay Ohio ratepayers at 108 percent of the rate.
LME aluminum closed on Wednesday at $1,838 per
"While repayment is not typically required, the
extraordinary relief offered to Ormet creates a question of
fairness that should be resolved in favor or ratepayers,"