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Ormet Cuts To One-Third Its Operation

By Staff | Aug 7, 2013

Ormet Corporation will soon be operating only a third of its pot-lines as employees, their families, and the entire Ohio Valley anxiously await a decision by the Public Utilities Commission of Ohio that could lead to the permanent shutdown of the plant.

“Ormet Corporation soon will only operate two of its six aluminum pot-lines because the company must quickly reduce costs, President and Chief Executive Officer Mike Tanchuk said in a July 31 release.

This decision came after the Public Utilities Commission of Ohio refused to grant immediate, emergency rate relief, in the form of deferrals of August’s and September’s, electricity bills, in Ormet’s ongoing dispute with American Electric Power.

The Wheeling Intelligencer reported last week that one of the causes of the rate dispute between the two companies is the the fact that AEP could raise Ormet’s bills to $62.83 per megawatt hour. The rate was just $39.66 per megawatt hour when the companies reached their power agreement in 2009.

Jeff Rennie, senior communications consultant, of AEP, responded to a request for a statement concerning the rate increases and the possible lawsuit with a list of points he said AEP would like to make.

“Ormet receives a significantly discounted price for electricity from AEP Ohio through a provision in Ohio law called a reasonable arrangement.” Explaining, Rennie stated that the difference between Ormet’s special price and the normal price similar industrial customers would pay AEP Ohio is paid by all other AEP Ohio customers.

“The Supreme Court of Ohio ruled in 2011 that Ormet cannot shop for an alternate power generation supplier during the term of its reasonable arrangement with AEP Ohio,” Rennie continued. AEP Ohio reserved a significant amount of power generation capacity and energy for Ormet for the term of its contract. Ormet should not be permitted to switch providers without compensating AEP Ohio for those investments made on its behalf.”

Rennie stated that if Ormet was permitted to contract with another power generation supplier, then the lost generation revenue would significantly harm AEP Ohio.

“Due to falling aluminum pricing, Ormet has found it more and more difficult to profitably run its business and has looked to AEP Ohio and the State of Ohio, through the PUCO, to reduce energy costs through a greater subsidy paid for by other AEP Ohio customers. In spite of the significantly discounted price Ormet pays for electricity, the aluminum market is so difficult that Ormet filed for bankruptcy,” Rennie said.

Jason Gilham of the PUCO was able to clarify the situation with an interview by phone the Monday afternoon.

“The biggest thing, the first thing, is this still is an open case. We are kind of limited on what we can speak to the merits of it.” He added, “The commission is continuing to work with Ormet. We are trying to quickly advance the process. We understand the sensitivity. The thing I would point to, is that last Wednesday with the commission’s order . . . it really only confirmed the attorney examiner’s decision. That order did not deny their consideration, their current application with the PUCO.” When asked about the criticism the commission had received due to saying the situation was not an emergency, Gilham explained that the request did not fall under what Ohio Revised Code deems as an emergency.

Gilham stated that PUCO has worked with the company before. “To date, the company has actually received unique rate arrangements. They are $227 million through that arrangement. They’ve received an additional $27 million last year when they were able to defer their October and November bills . . . When the unique arrangements reaches its total in 2018, it would be $308 million.” Gilham said Ormet’s application is to change the rate that they now have.

Ormet’s motion submitted July 31, stated that the company would pay the August and September deferred invoices-if deferred-within five business days of the closing of the sale to Smelter Acquisition, LLC., which is contingent on lower energy rates.

Tanchuk said he was “terribly disappointed” the Public Utilities Commission of Ohio on Wednesday refused to grant emergency rate relief in Ormet’s ongoing dispute with American Electric Power.

Ohio Representative Jack Cera (D-Bellaire) and state Senator Lou Gentile (D-Steubenville) both expressed frustration over PUCO’s ruling as well. Cera stated that keeping Ormet operating is vital to the Ohio Valley and the state of Ohio. “We have been working with state officials to make sure they understand the economic and social impact that losing Ormet would have on the area.” He added, “Ratepayers will be hit with additional costs whether Ormet is operating or not, since they are such a large user of power and a huge part of AEP’s rate base. The closing of Ormet will devastate Monroe County. We believe the governor’s office can work to expedite a decision more promptly than the end of August to help the state of Ohio remain competitive in job growth and retention.”

Gentile said PUCO’s refusal could jeopardize nearly 1,000 good paying jobs in eastern Ohio. “Ormet is asking for temporary relief to save and protect employees,” he said. “The PUCO is fully aware that Ormet’s ability to keep operating was contingent upon the approval of an adjusted electricity price.”

Gentile added, “Ohio’s utility regulators had the opportunity to keep 1,000 people off of unemployment in Ohio. Now, dedicated and longstanding employees are faced with uncertainty about their pensions and future employment. This decision will not only affect the workers, it is going to hurt families, the Switzerland of Ohio Local School District, and the local economy.”

US State Senator Joe Manchin (D-WV), as well as U.S. House of Representatives David McKinley’s spokespersons both responded to a request for a statement. Unfortunately, both gentleman were away on business and were unavailable to give a personalized response on Aug. 6.

“In the current metal pricing environment, Ormet simply cannot overcome the massive increase in the Ohio Power electric rates experienced over the past several years. Ormet must receive the relief requested to continue operations and build a future for our employees and community,” Tanchuk had said on July 31.

John Puskar, USW staff representative agreed, in a comment to The Intelligencer: “Ormet is trying to stay open to save these jobs . . . They have done everything they can. You are talking about 1,000 jobs that could be gone.”