Century, Big Rivers make their cases to public [Messenger-Inquirer, Owensboro, Ky.]By Joy Campbell, Messenger-Inquirer, Owensboro, Ky.McClatchy-Tribune Information Services
July 25--Century Aluminum employees are fighting for their jobs, writing letters and contacting local, state and national leaders about the stalemate between their employer and Big Rivers Electric Corp. in negotiating a new electric rate plan. Century officials have told employees that without a better power rate, the plant will shut down.
Big Rivers Electric also is making its case to the public with its concerns that other residential and industrial ratepayers will have to pay significantly higher monthly utility bills if the company gives Century what it's asking for. Residential customers would pay about $1,000 more per year, the company said.
In the past week, lots of finger-pointing has taken place. Each party is trying to get its message out to the public through letters and ads in area newspapers, and other venues.
Century provides 771 direct jobs in Hawesville, according to information from the company.
Century has met with the Lewisport City Council, Hancock Fiscal Court and the Hancock Industrial Foundation and plans other meetings, public officials said Tuesday.
"We, as a region, have a whole lot at stake," Nick Brake, president and CEO of the Greater Owensboro Economic Development Corporation, said about the negotiations.
Brake said the Owensboro EDC has been working closely with the Hancock County Industrial Foundation on these issues "at various levels for more than a year."
Northwest Kentucky has two of the nine aluminum smelters in the U.S., and that is a big contributor to the state being one of the top automobile-producing states, he said. A lot of aluminum goes into vehicles.
"Rising power and falling aluminum prices have put Century at the point of terminating its business in Hawesville, according to its officials," Brake said. "They have said they are noncompetititve."
Owensboro residents hold about 300 of the 771 Century jobs, he said.
"It's a complex situation, and there is not an easy answer that is a win-win," Brake said. "What's the cost to the region to keep the plant? Is it a cost we are willing to assume? What is the cost of letting it go? I've heard different scenarios of which one costs more. Either way, more cost to ratepayers is inevitable."
No-win scenarios so far
Century and Rio Tinto Alcan asked Big Rivers for $110 million annually in rate concessions from their contracts. That is the loss the utility would incur if both smelters closed. Century's share of that is $62 million, according to information the company provided.
Those rate increases during a still-recovering economy "would be devastating to our customers, and we believe it's an unreasonable amount for them to pay," said Mark Bailey, president and CEO of Big Rivers Electric.
If Big Rivers granted the full $110 million to Century and Alcan, residential customers would see a rate hike of about 37 percent, and industrial customers would incur a 56 percent increase. The average residential customer would pay about $1,000 more per year in electric utility bills, Marty Littrel, Big Rivers' manager of communications and community relations, said Tuesday.
"First of all, we don't want to see any of our customers shut down," Littrel said. "If Century did shut down, we have estimated that average residential rates would go up about 19 to 20 percent. That's a big difference."
Littrel admitted that Century's closing could impact other companies, including Alcan. But Alcan officials have not said it would close without the concessions, he said.
Century officials said without Big Rivers providing fair, short-term rate relief, the utility is guaranteeing a $110 million rate increase for its customers and the loss of hundreds of jobs.
On Tuesday, each party still had differing views on how negotiations were or were not proceeding.
"Mr. Bailey's public statements have been inconsistent with the facts," John Hoerner, vice president of North American Operations for Century Aluminum, said in an email statement. "Century has been willing to negotiate a fair power rate since Day One. To date, Big Rivers management has not returned to the negotiating table to work toward a solution. Unfortunately, power rates are going to increase, but by working together to seek a reasonable compromise, Century Aluminum and Big Rivers can reduce that rate increase and save the smelter from closure. A reasonable compromise will also prevent the loss of hundreds of good jobs. If a solution is not reached, the outcome will be skyrocketing electric rates for families and businesses in the region as well as catastrophic job losses."
Littrel said Big Rivers was not aware negotiations had ceased until a reporter called him Thursday.
"We've continued to work with Century and have been waiting for them to call," Littrel said. "We had a talk this afternoon (Tuesday), and it's the first contact since June 24. We found out today that they are willing to continue talks. It's frustrating. We never walked away. Unfortunately, they were requiring more financial assistance than Big Rivers' customers can afford."
Both Big Rivers and Century confirmed that the last offer from Big Rivers was $27 million on June 24. Littrel said that was for the short term. Additionally, they would receive $34 million over the next 12 years. The smelters declined that offer.
Rio Tinto Alcan is a part of the negotiations. Littrel said Big Rivers would not want to give concessions to Century without offering them to Alcan as well.
Information supplied by Century indicates the company made it clear its representatives were willing to negotiate down from its $62 million request for relief.
Big Rivers also offered both smelters the opportunity to get power from the open market, but they declined, Littrel said.
"Yet, Century is talking about how much cheaper open market prices are," he said. "Open market rates are down, so naturally, they want out of their contract. I understand that."
Buying on the open market means dealing with wide price fluctuations, he said. In 2009, when Century negotiated its current contract, the company wanted off the open market because of those rate uncertainties.
In 2009, Century negotiated and agreed to a contract with a long-term, climbing rate. The 2012 rate is $52 per megawatt hour. But Littrel said each year the company has paid less than the agreed-to rate. This year it is paying $48 to $49 per megawatt hour.
Big Rivers has proposed a reduction of $3.73 per megawatt hour or a rate of about $45.60 for the first year, and the rate would go even higher in later years, according to Century.
Century interpreted Big Rivers' communication that it had "no solution for how to close the gap," as the utility's refusal to negotiate.
Similar community strife is unfolding in Ravenswood, W.Va., where Century is trying to reopen a smelter it shuttered in 2009. About 650 workers lost their jobs then.
Century discontinued health care coverage for its Ravensvood plant retirees in 2010, but a deal was reached in March of this year that would give back some of the benefits, according to a June 10 story in the Parkersburg News and Sentinel.
Reopening the plant is stalled. Century's power provider in Ravenswood, Appalachian Power Co., has said that the special rate is too risky for its thousands of customers across West Virginia. Century has asked the West Virginia Public Service Commission to approve a special rate.
Appalachian Power Co. said in the News and Sentinel story that it supports the reopening of the Ravenswood plant, but the cost would be too high for its customers.
West Virginia lawmakers also have passed tax incentive legislation using coal severance funds, Brake said.
"That's something we tried to get traction on with the last legislative session," he said.
Community wants settlement
Lewisport Mayor Chad Gregory said three Century representatives gave a presentation to the city council Thursday night that showed how the increase in utility rates along with cheap aluminum prices are affecting them on both sides of the ledger.
"Overall, they presented their case and approached us for support and understanding," Gregory said. "We support both Century and Big Rivers and want them to reach a decision that will benefit both sides."
Lewisport City Councilwoman Mary Ella Rummage said she appreciated the Century group taking the time to share information. "I see it as two businesses trying to negotiate, and they're not quite on the same step," Rummage said.
Rummage said it reminded her a little bit of a family story involving men working with two mules to clear timber from the woods.
"Sometimes they worked together, and sometimes they didn't," she said. "Hopefully, these two (businesses) will get back to working together."
Councilwoman Shirley Hays said she hopes both parties can come to terms. "It will have a big impact on our community if they don't get things straightened out."
Century Aluminum Company, which trades as CENX on NASDAQ, reported a net loss of $12.3 million for the second quarter of 2012. The results were released Tuesday. For the first half of 2012, the company reported a net loss of $16.7 million. More information about the Monterey, Ca.-based company may be found online at: www.centuryaluminum.com.
Big Rivers is a not-for-profit utility company with 112,000 customers through its three distribution cooperatives -- Kenergy in Henderson; Meade County Rural Electric in Brandenburg; and Jackson Purchase in Paducah. More information is available at: www.bigrivers.com
Joy Campbell, 691-7299, firstname.lastname@example.org
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