July 31, 2013 / 11:34 PM / in 4 years

Ohio regulator rejects Ormet's expedited request for cheap power

3 Min Read

NEW YORK, July 31 (Reuters) - Ohio's state utility regulator on Wednesday rejected Ormet Corp's appeal for an expedited decision on the aluminum producer's request for lower electricity rates, which it said are crucial to operating its aluminum smelter and alumina refinery.

The ruling by the Public Utilities Commission of Ohio (PUCO) was on the company's emergency appeal for lower rates. A full hearing on Ormet's request remains on the docket for August 27.

Ormet had asked for an expedited decision to cut power costs for its 260,000 tonne-per-year Hannibal, Ohio aluminum smelter and for its Burnside, La. alumina refinery, which has an annual capacity of about 600,000 tonnes.

Five months ago Ormet filed for Chapter 11 bankruptcy protection citing low aluminum prices and high power costs.

Securing lower energy rates is a key part of the company's plan to emerge from bankruptcy. Last week, a bankruptcy judge ruled that Ormet could curtail operations at its smelter and alumina plant if it deems doing so necessary.

Benchmark aluminum prices on the London Metal Exchange are near four-year lows around $1,800 per tonne. That is below the cost of operation for a large percentage of global smelting capacity.

The PUCO commissioner said at Wednesday's hearing, which was webcast, that the commission made its decision because it thought issues pertaining to Ormet's power rate application required more indepth discussion.

Its application with PUCO requests numerous changes to its power agreement with AEP Ohio, a subsidiary of American Electric Power Service Corp, one of the largest U.S. electric utilities spanning 11 states.

A PUCO commissioner on Wednesday said Ormet receives "a substantial discount off the price of its power." Ormet contends that it is paying rates much higher than today's market rates.

Ormet sought to be allowed to tap the open market for its power in 2014 and to fix its electricity price during 2013 at $45.89 per megawatt hour, the amount billed to Ormet during the first quarter of 2013.

According to a July 15 filing with the PUCO, "The requested relief is necessary to enable Ormet to emerge from a recent bankruptcy sale as a going concern and to continue its operations in Ohio."

In June, the bankruptcy court approved the sale of Ormet to investment firm Wayzata Investment Partners.

Ormet executives were not immediately available for comment.

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