PSC rejects Noranda’s rate-change request
Originally published August 20, 2014 at 2:30 p.m., updated August 20, 2014 at 11 p.m.
Noranda Aluminum won’t get reduced rates right now, the Missouri Public Service Commission said Wednesday.
On a 5-0 vote, commissioners approved a 31-page order saying Noranda had not made its case for reducing the electric rates it now pays Ameren Missouri.
Ameren is the state’s largest regulated electricity provider, and Noranda is its biggest customer.
Under the current rate schedules the PSC approved in December 2012, and that went into effect in January 2013, Noranda pays the lowest cost for electricity of any Ameren customer.
All the parties agree the current rate is fair, since the company’s aluminum smelter near New Madrid in the Missouri Bootheel consumes about 480 megawatts of electricity 24 hours a day, every day of the year — with almost no variability.
“When the New Madrid smelter is at full production, at current rates, Noranda pays Ameren Missouri approximately $160 million in base rates,” the PSC noted in its order, “plus additional charges under Ameren Missouri’s fuel adjustment clause.”
Those add up to about $41.44 for each megawatt-hour (MWh) of electricity Noranda uses — but the company said it could afford only $30 per MWh, in its request for reduced rates filed with the PSC on Feb. 12. That request also asked the commission to limit future increases to no more than 2 percent any time Ameren raises its rates — and to exempt Noranda from the fuel adjustment clause that allows Ameren to adjust all customers’ rates when its fuel costs change.
And Noranda proposed that other customers’ rates be increased so that Ameren Missouri wouldn’t lost money overall on its current rate schedule.
“That was harmful to our other customers and would have set Noranda’s rate well-below what it costs to serve them, resulting in a shift of over half-a-billion dollars onto our other customers,” Warren Wood, Ameren Missouri’s vice president for legislative and regulatory affairs, said Wednesday.
Noranda had argued it needed the lower rates — and might have to shut down the New Madrid plant without them — because it has ongoing cash problems.
But the commission’s order noted Noranda painted a much more optimistic picture for Moody’s Investment Services just two weeks before filing its rate-change request.
“We were not persuaded that Noranda’s alleged liquidity crisis was of such severity as to justify granting the relief requested,” PSC Chairman Robert Kenney said shortly before the commission’s vote.
Commissioner Bill Kenney, one of three former state senators serving on the PSC, added: “I don’t think it was proper to subject the rest of the ratepayers to subsidize them.”
Wood, and all five commissioners, agreed that Noranda’s work — and the nearly 900 jobs it provides — are important to the state and Southeast Missouri economies.
But commissioners said Noranda’s economic development issues should be addressed by the Legislature, not the commission.
They urged Noranda to continue talking with Ameren and other interested parties, as part of the utility’s new rate increase request filed last month, that the PSC must decide by next June.
John Parker, Noranda’s vice president of Communication and Investor Relations, told the News Tribune Wednesday, in an email: “While we are disappointed with the PSC’s decision to deny Noranda rate relief at this point, we remain committed to transforming our cost structure and to reducing the cost of New Madrid’s electricity.
“We will thoughtfully evaluate our alternatives for accomplishing our objectives and provide additional information at an appropriate time.”
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