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Noranda's rate case gets PSC hearing in 2 weeks

Noranda's rate case gets PSC hearing in 2 weeks

Public comments session set for June 11 in Noranda, Ameren dispute

June 1st, 2014 in News

On June 16-17, the Missouri Public Service Commission holds the first of two formal hearings this summer in two cases involving Ameren Missouri, the state's largest electricity provider, and Noranda Aluminum, Ameren's largest customer.

And the Jefferson City Area Chamber of Commerce is among a number of groups and businesses who have urged the commission to reject Noranda's request for a change in the rates it pays for electricity.

"With a low rate for electricity that is already 60 percent below rates paid by the average Ameren Missouri residential customer, Noranda Aluminum's request for an additional 25 percent rate reduction goes too far," Chamber President Randy Allen told the PSC in a May 9 letter.

But Noranda said in its request: "Electricity represents one-third of the New Madrid Smelter's operating costs." Since 2008, its annual electric bills increased by about $44 million, the company said.

Under the current rates, in effect since January 2013, Noranda pays about $160 million a year in base rates, for "485 MW of power, 24 hours a day, 7 days per week, 52 weeks per year, with a 98 percent load factor," the company said. "Without the requested reduction in its electric rates, the New Madrid Smelter would have insufficient liquidity to remain viable and would be subject to closure - resulting in the loss of all jobs at the facility."

Before the June 16-17 hearing , the PSC will hold a June 11 public hearing in Jefferson City, covering both cases Noranda filed last February:

• Asking the commission to reduce its rates for electricity from Ameren to $30 for each megawatt-hour, while adjusting everybody else's rates so that any changes are "revenue-neutral" to Ameren.

• Complaining that Ameren has earned at least $100 million more than authorized under the terms and conditions of the rates that went into effect 17 months ago - and asking the PSC to revise those rates to "just and reasonable levels."

The PSC has scheduled the formal hearing in the "overearnings" case for July 28-Aug. 1.

On June 11, commission staff will take sworn statements from the public about either, or both, cases, following a public information/question and answer session that starts at 6 p.m., in the Governor Office Building Room 450.

At the heart of both cases is Noranda's special position among Ameren's customers.

The company's aluminum smelter at New Madrid is one of only nine smelters in the United States.

Noranda uses an almost steady stream of electricity in its process for converting aluminum oxide into molten aluminum.

In its Feb. 12 rate-change request, Noranda reminded the PSC that the smelting operation "consumes approximately ten percent of the power that Ameren Missouri produces."

Because it has a predictable electric consumption and a fixed distribution system, Noranda has its own class in Ameren Missouri's rate structure - the lowest rate charged to any Ameren Missouri customer.

"Key consumer groups across the state support this filing because it saves ratepayers millions of dollars a year, by keeping Noranda on the regulated power grid in Missouri," John Parker, Noranda's vice president of Communications and Investor Relations, told the News Tribune Saturday. "Without a change, the company said in its Feb. 12 filing, the New Madrid plant might have to close - cutting off employment for about 900 people.

Supporters include some union groups.

Robert A. Soutier of the Greater St. Louis Labor Council, told the PSC in a two-page letter: "For decades, we have watched as good paying Midwestern manufacturing jobs have been shipped overseas. Nowhere has this been truer than when it comes to aluminum smelters."

But, Michael D. Walker, business manager for the St. Louis-based International Brotherhood of Electrical Workers Local 1439 - with more than 700 members working for Ameren - told the PSC in a May 16 letter that he "finds it difficult to find any justification" for Noranda's rate-change request.

The commission expects to decide the case by Aug. 6.