Eramet tries to make its case for rate break

Hearings on Eramet Marietta's request for discounted electrical rates resumed Monday in Columbus, and a document filed in the case offers changes addressing some criticisms of the deal.

Eramet applied for the discount from American Electric Power in June. According to the application, Eramet is evaluating approximately $40 million worth of upgrades to its current manufacturing operations.

But the application states that those upgrades depend on the company's ability to secure a reliable supply of electricity at "a reasonable and predictable price" over a term that will allow the capital investment.

Under the proposal, AEP would be allowed to recover the millions of dollars lost over the 10-year life of Eramet's discount from other rate-payers. Such a move requires approval by the Public Utilities Commission of Ohio.

In testimony filed with the PUCO, the Ohio Consumers' Counsel recommends rejecting the deal. Counsel spokesman Ryan Lippe said Eramet's initial proposal doesn't justify passing the cost of the discount on to other consumers.

"They're not promising new jobs or to maintain its operations in Ohio for the entire length of the agreement," he said. "They're not specifying any special benefits. So really, the company being helped by this is Eramet. They need to prove there's truly economic development that will result from this."

In its application to the PUCO, the company estimated the direct impact on the economy, including current employees, retiree benefits, vendor payments and state and local taxes, was around $120 million in 2008.

A stipulation negotiated by Eramet and the PUCO staff, and filed with the PUCO on Aug. 5, includes provisions that Eramet make capital improvements of at least $20 million by Dec. 31, 2011, and another $20 million worth by the end of 2014. During the term of the arrangement, Eramet would also be required to employ an average of 200 people a year. It currently employs 230.

The stipulation would also grant the PUCO authority to modify the agreement if Eramet did not fulfill those requirements or make "reasonable progress" toward corporate approvals for a total capital investment of $100 million.

Eramet spokeswoman Joy Frank-Collins said the arrangement is part of an effort for the company to execute a planned expansion and renovation aimed at improving the facility's environmental impact and ensuring its sustainability.

"It's been almost a year since we announced $150 million in planned expansions at the facility, and in that announcement we were very clear that getting a reasonable power rate was one of our contingencies in making those upgrades," she said. "One of the things I can tell you is kind of our mantra: Electricity is Eramet Marietta's lifeblood. Without a reasonable power rate, the future viability of the plant is at stake."

The stipulation recommends Eramet's original price proposal of $0.04224 per kilowatt hour in 2009 through 2011. In 2012, the discount rate would be altered to 20 percent of what Eramet's monthly bill would be without the arrangement. That percentage would then decrease until it reached zero in 2019.

The stipulation also sets a minimum monthly payment for Eramet to make and a maximum amount of power that can be received at the discounted rate.

The stipulation has only been presented to the PUCO; it has not been approved.

If a deal is approved, the consumers' counsel suggested six changes be made to Eramet's original request, including restricting the rate discount to six years instead of 10 and capping the money Eramet could save from the discounts at $40 million.

In testimony, the consumers' counsel said if the agreement is approved, several other industries could pursue similar arrangements.

Eramet requested the rate arrangement less than a week after Ormet Corp. received PUCO approval for a similar discount on the rate it pays for electricity, with the difference to be made up by other Ohio AEP customers.

"This is on the heels of Ormet, and we could see other companies coming in and asking for rate subsidies," Lippe said. "If they grant Eramet everything at once and don't put a consumer safeguard on it... we could certainly see a rush of applications from other similarly situated customers."

The Ormet agreement is expected to add less than $2 a month to customers' bills. It was not immediately clear how much Eramet's deal would add, if approved.

Lippe said there are 20 other companies on the same rate schedule as Eramet and each of those could seek similar arrangements if this request is "rubber stamped."

"At what point do you say customers only have so much money going around and the customers can't subsidize all these companies to the extent that they want help?" Lippe said. "Everything is being done on the backs of the different customers, whether it's residential, small business or large business."